U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

              [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

                       THE SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2002

            [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

                       THE SECURITIES EXCHANGE ACT OF 1934

                         Commission File Number 0-10416

            ---------------------------------------------------------
                              INFODATA SYSTEMS INC.
              (Exact Name of Small Business Issuer in its Charter)

               Virginia                                  16-0954695
       (State of Incorporation)             (I.R.S. Employer Identification No.)

12150 Monument Drive, Fairfax, Virginia                    22033
(Address of Principal Executive Office)                  (Zip Code)

                   (703) 934-5205 (Issuer's Telephone Number)
            ---------------------------------------------------------

         Securities registered under Section 12(b) of the Exchange Act:

                                                   Name of Each Exchange
         Title of Each Class                       on Which Registered
                 None                                 Not applicable

         Securities registered under Section 12(g) of the Exchange Act:

                           Common Stock-$.03 Par Value
                                (Title of Class)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.   Yes X   No

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]

The registrant's revenues for the fiscal year ended December 31, 2002 were
$9,802,662.

As of March 25, 2003, there were 5,021,697 common shares outstanding. As of
March 25, 2003, the aggregate market value (computed by reference to the average
bid and asked prices on such date) of voting common shares held by
non-affiliates was approximately $1,836,000.

Transitional Small Business Disclosure Format (check one):  Yes     No X

<PAGE>

                       DOCUMENTS INCORPORATED BY REFERENCE

The information called for by Part III of the Form 10-KSB is incorporated by
reference from the registrant's definitive proxy statement or amendment hereto
which will be filed not later than 120 days after the end of the fiscal year
covered by this report.

PART I

Item 1. Description of Business

Founded in 1968, Infodata Systems Inc. ("Infodata" or the "Company") has 35
years of content and document management experience. Infodata provides
enterprise software and integration solutions that assist regulated businesses
and controlled government agencies in constructing or augmenting Enterprise
Content Management (ECM) solutions. Further, the Company offers specific
vertical market solutions for life cycle management of content. The Company does
this by delivering a software services layer that enhances the capabilities of
content management systems. The Company serves three markets with consistent
product and service offerings: Commercial, Government, and the Intelligence
Community.

Infodata has the demonstrated knowledge and expertise to offer an array of
solutions including Content Review, Content Assembly and Publishing, Content
Transformation, Content Security and Content Analytics. The Company chooses to
work with only the highest caliber of partners to ensure its solutions employ
the best technology to solve real business and organizational problems.
Infodata's unique proprietary products integrate with leading edge solution
environments from Adobe and Documentum and are geared to review, assemble and
publish, secure and accelerate all facets of content management lifecycle
processes. Moving forward, the Company's objective is to position itself as a
leading force in content and document management, and to define a Content
Management Services Layer (CMSL) that incorporates both products and services in
providing solutions to regulated industries and the Government agencies they
interact with and are regulated by. These specific capabilities within this
layer are critical to:

     o    Providing specific industry applications expertise, with both products
          and services, for thin and thick client applications (e.g., Adobe) and
          backend ECM systems (e.g., Documentum) in order to solve specific
          problems in vertical markets; and,

     o    Delivering needed content management software functionality (within
          the ECM environment) to organizations that create, modify, assemble,
          review, approve, and publish content.

Commercial Business

In the Commercial sector, the Company targets Pharmaceutical, Financial Services
and Manufacturing companies in the Global 2000 who have significant problems in
dealing with any or all of the following:

     o    New Drug Applications
     o    Standard Operating Procedures (SOP)
     o    Environmental Records
     o    Modification of Technical Documents
     o    Adverse Event Report
     o    Contract Development and revisions
     o    Document conversion and standardization
     o    Significant and labor intensive content and publishing activities

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<PAGE>

Government Business

In the Government market, Infodata targets Federal agencies such as FDA, HUD,
FDIC, and DoD where content re-use, conversion, tracking, control, review and
publishing provide significant value and cost savings over currently used
methods. Recent trends indicate a more rapid adoption of ECM systems in the
Federal Government, because by its own nature, the Federal Government is in the
business of creating, reviewing, assembling and publishing information. The
volume of content that it must deal with is staggering, which presents a
significant opportunity for the Company, as the move to centralize and manage
content is driven by the need for efficiency.

Intelligence Community Business

For more than 20 years, Infodata has been providing highly innovative software
and services for the planning, collection, processing, analysis and
dissemination of information to selected customers in the Intelligence (Intel)
market. The Company's talented and experienced personnel who support Intel
customers design and deliver products and system solutions for all purposes -
source data capture, analyst collaboration, document management and search,
multi-format delivery, and information visualization and exploitation.

Solution Offerings

Infodata's solution offerings are a critical factor for the long-term prosperity
of the Company. The six solution concentrations below describe these offerings.
These are typically not just a mixture of product and service implementations
but include the unique techniques and toolsets that have been developed by
Infodata over the Company's 35-year history. Infodata's longevity, focused
solutions and product expertise are a key differentiator in the marketplace.
They serve as the catalysts that drive the Company's Sales, Marketing, and
Research and Development initiatives. The Company's content assembly and
publishing solution has been tailored to meet the needs of its three lines of
business: Commercial, Government and Intel.

     o    Content Review: The need to review and annotate documents is important
          to every enterprise. Content Review can take the form of simply
          exposing a document on a local area network for review and comment, or
          can be as complicated as moving a document through a series of highly
          complex workflows that change the document's state and access
          privileges throughout the process. Whatever the case, in today's
          regulated and controlled environments, content review can be a labor
          intensive and costly effort.

     o    Content Assembly and Publishing: Infodata's content assembly and
          publishing solution can provide dramatic cost savings. This solution
          integrates ECM repositories, unique workflows and techniques, and
          Infodata's proprietary Compose(R) product, for the automation of
          assembly and publication of content. Content assembly and publishing
          is always a laborious and tedious process, burdened by many steps that
          induce errors and result in rework. Infodata's solutions simplify the
          work, enhance quality, and accelerate the process.

     o    Content Security: Infodata's content security solution provides
          stateof-the-art document level security by using access control list
          techniques coupled to business processes to enforce file and XML
          component level security. For Intel customers, the heart of Infodata's
          security solution entails the integration of the Company's proprietary
          Signet product with other technologies such as PKI, X.509, or wrappers
          to meet customer requirements. Infodata is also able to leverage its
          work with Intel customers by exploiting XML tags to apply security to
          the paragraph level of documents. For pharmaceutical customers,
          Infodata applies its content security solutions to 21 CFR compliance
          issues and the protection of proprietary information.

     o    Content Transformation: Infodata's Content Transformation solution
          provides the mechanisms for transforming document formats in single,
          multiple, or very large batches (scaling up to 60,000 documents per
          day). The Company's proprietary e-Hub solution provides the means to
          convert TIFF files to PDF, which can be further modified as necessary.
          For pharmaceutical customers, e-Hub provides rapid and tangible return
          on investment by converting test results into useable PDF renditions.

                                       3
<PAGE>

     o    Content Analytics: Infodata plans to leverage its past customer work
          by packaging new product offerings and solutions. The Company intends
          to bring to market the unique applications that it has developed and
          make them commercially available as an overall content analytics
          solution set. Infodata's present content analytics solutions, which
          leverage data in ECM and transactional systems, will lead to improved
          business visibility for the Company.

     o    3rd Party ECM (Enterprise Content Management) System Planning and
          Integration: The future core focus of Infodata's Professional Services
          group will center on industry practices built around leading ECM
          providers. Infodata's services activity extends and compliments ECM
          offerings, enabling satisfaction of specific business processes of a
          customer. The Professional Services group's engineering activities
          provide the unique methods and controls required for content
          management in regulated industries.

Proprietary Products

Organizations are dealing with explosive growth in the amount of document
content they must create and manage. There is also an increasing need to bring
distributed groups of people together to collaborate on document creation and
review. Infodata has developed a suite of proprietary products that automate the
life cycle of content management, which improves efficiency and productivity.

     o    AnnoDoc(TM) provides seamless, secure integration between Adobe
          Acrobat's annotation tools and a content repository, enabling
          enterprise-wide document collaboration. AnnoDoc merges the desktop
          power of AdobeAcrobat with the enterprise-wide global repository tools
          of Documentum. Offering an intuitive browser-based user interface,
          AnnoDoc can be used to annotate and develop documents over the Web.
          AnnoDoc streamlines and accelerates the document review process by
          permitting parallel processing while allowing the annotations to be
          stored as a separate object, preserving the document's integrity.

     o    Compose(R) provides a comprehensive set of publishing tools for Adobe
          Acrobat software that streamlines document production tasks by
          automating many functions inherent in Acrobat, saving countless hours
          of work. The Compose tool palette allows easy access to more than 20
          powerful publishing tools. Vital tools include the ability to
          repaginate documents; validate links; set security, printing, and file
          open options; and create bookmarks, hypertext links, and tables of
          content. The tightly integrated Compose toolset is scalable for
          extremely large file groups and is designed for processing files en
          masse. Compose allows the user to create powerful documents when it's
          not feasible to create them by hand.

     o    Signet is an off-the-shelf security solution that enables information
          publishers to ensure that only authorized users are able to read their
          PDF documents. Signet is ideal for publishers who want to exercise a
          high degree of control over a document's use, including when and under
          what circumstances it will expire.

     o    Infodata Foundation Server has evolved out of the AnnoDoc product.
          AnnoDoc is a multi-tier product that provides advanced annotation
          support and integration between Documentum and Adobe Acrobat. The
          creation of a separate product for the server centralizes and
          standardizes several of the core components of AnnoDoc and other
          Infodata proprietary products.

     o    INQUIRE(R)/Text is a full-text retrieval product used for storing,
          indexing, retrieving, and managing large collections of documents on
          IBM and IBM-compatible mainframes. INQUIRE/Text software is used by
          major companies, utilities, hospitals and government agencies for
          automating document-centered applications such as on-line manuals,
          legislative tracking and regulatory compliance, library management,
          litigation support, medical records and government and military
          intelligence.

     o    WebINQUIRE(R) is an extension product that provides web browser access
          to INQUIRE/Text collections. WebINQUIRE permits users to store
          documents created using desktop software on a mainframe computer,
          retrieve documents from the mainframe and edit them on their desktop
          using desktop applications, such as

                                       4
<PAGE>

          Microsoft Excel and Microsoft Word. In addition, WebINQUIRE's search
          formats and views can be easily customized.

Industry Background

The enterprise content management (ECM) industry continues to grow rapidly and
offer a great deal of opportunity. According to the research firm META Group,
the ECM market will consolidate into a $10 billion market by 2005. There is
widespread agreement among analysts that the ECM market today is $500 - $700
million and growing rapidly. The dramatic growth will continue because the
impetus for ECM justification begins with information management and quickly
migrates to organizational consistency, improved productivity, and cost
reduction. This subsequently leads to customer service and records management
improvements, which should accelerate time to market and improved regulatory
compliance. In short, improving the ECM tools for the enterprise worker helps
organizations strategically manage content to enable better front-line
decisions, increase organizational efficiencies, and reduce costs.

Sales and Marketing

The Company is focused on building its sales pipeline of prospects in the
Commercial, Government, and Intelligence markets. The sales and marketing effort
is focused on solving customer problems in and around content review, content
assembly and publishing, content security, content transformation, and content
analytics. These solution offerings deliver market value by automating the
processes around these three critical solutions. The Company approaches the
market through its direct sales force, an inside sales force, and through
channel partners. In addition, certain proprietary products are procured
directly by customers via the Company's Web site.

Competitors

The market for the Company's content management solutions is intensely
competitive and subject to rapid change as a result of technological advances,
new product introductions and marketing activities by industry participants.
Infodata faces a number of competitors in the content management solutions
market. In the Commercial market, the primary competitors include: Workshare,
iMarkup Solutions, Information Graphics, Cimmetry Systems, and other Documentum
service providers. In the Government and Intel markets, the Company faces
competition from other federal contractors who bid on knowledge, document and
records management projects.

The Company's competitors may have longer operating histories; significantly
greater financial, marketing, service, support, technical and other resources;
better brand name recognition; and/or a larger installed customer base. As a
result, these competitors may be able to respond more quickly to new or emerging
technologies and changes in customer requirements, or to devote greater
resources to the development, promotion and sale of products and services.
Moreover, the Company's competitors may be able to develop products or services
comparable or superior to those offered by the Company, offer lower priced
products or services or adapt more quickly than the Company to new technologies
or evolving customer requirements.

In order to be successful, the Company must respond to technological change,
customer requirements and competitors' current products, services, and
innovations. There can be no assurance that the Company will be able to compete
effectively in its market or that competition will not have a material adverse
effect on its business, operating results and financial condition.

Customers

Many major companies and government organizations use the Company's proprietary
products and services. Sales to government customers represented 67.8% of
revenues in 2002 and 73.6% in 2001. One U.S. Government intelligence customer
accounted for approximately $3,244,000, or 33.1%, of the Company's 2002
revenues, and approximately $6,429,000, or 41.4%, of the Company's 2001
revenues. On March 1, 2002, the major U.S. Government intelligence customer
notified the Company that the scope of its largest contract was going to be
substantially reduced. During the quarters ended March 31, 2002, June 30, 2002,
and September 30, 2002, this contract accounted for approximately


                                       5
<PAGE>

$1,319,000, $502,000, and $47,000 of revenues, respectively, or approximately
$1,868,000, or 19.1%, of total revenues for the year ended December 31, 2002. On
April 26, 2002, the U.S. Government Agency delivered a unilateral contract
modification to the Company agreeing to an equitable adjustment of $47,105
related to the de-scope and termination of the contract. In May of 2002, another
contract with the same customer commenced, and for the quarters ended June 30,
2002, September 30, 2002, and December 31, 2002, accounted for approximately
$380,000, $492,000, and $503,000 of revenues, respectively, or approximately
$1,375,000, or 14.0%, of total revenues for the year ended December 31, 2002.

Certain of the Company's contracts with government organizations are
competitively awarded after a formal bid and proposal competition among
qualified bidders. These contracts may be cost-reimbursement contracts (both
cost-plus-fixed-fee and cost-plus-award-fee), time and materials contracts, or
fixed price contracts.

     o    Cost-plus-fixed-fee contracts provide for the reimbursement of
          incurred costs during contract performance, to the extent that such
          costs are allowable and allocable, and the payment of a fixed fee. The
          size of the fee is limited by federal guidelines to a set percentage
          of the contract value.

     o    Cost-plus-award-fee contracts typically provide for the reimbursement
          of costs and fee based upon a periodic evaluation of the Company's
          performance against specified criteria.

     o    Under time and materials contracts, the Company agrees to provide
          certain categories of labor that satisfy established education and
          experience qualifications at a fixed hourly rate. In these cases, the
          Company bears the risk that costs may exceed the fixed hourly rate,
          and the Company realizes all of the benefit or detriment resulting
          from decreases or increases in the cost per hour of performing the
          work.

     o    Under fixed-price contracts, the Company agrees to perform certain
          work for a fixed price and, accordingly, realizes all the benefit or
          detriment resulting from decreases or increases in the cost of
          performing the work.

Under certain circumstances and within prescribed timeframes, government
contracts awarded to the Company are subject to protest by competitors. Further,
the Company's government contracts contain standard termination clauses that
permit the government to terminate the contracts at any time, without cause.

To enter into engagements with the government, compliance with various
procurement regulations is required. The modification of existing regulations or
the adoption of new regulations could materially adversely affect the Company by
increasing its costs of competing for or performing government contracts. Any
violation of these regulations could result in contract termination, the
imposition of fines, and/or debarment from award of subsequent government
contracts.

Government contracts are subject to modification or termination in the event of
changes in funding. The Company's contract costs and revenues are subject to
adjustment as a result of audits performed by the Defense Contract Audit Agency
(DCAA) and/or other government auditors. The DCAA routinely audits
cost-reimbursement contracts to verify that costs have been properly charged to
the government. Many of the Company's government contracts require certain of
its employees to maintain security clearances complying with the requirements of
various government agencies.

Research and Development

The Company's 2002 Research and Development expenses increased from 2001 levels
by 50.1% due to its decision to increase spending on the development and
enhancement of new and existing proprietary products.

Proprietary Rights

The Company has secured the protection of a registered service mark for the name
INFODATA. It also owns the following registered trademarks: AnnoDoc(TM),
Compose(R), INQUIRE(R)/Text, WebINQUIRE(R), and AMBIA(R), and intends to
register the names Signet and e-Hub. The Company relies primarily on a
combination of copyrights and trademarks, trade secrets, confidentiality
procedures and contractual provisions to protect its proprietary rights.

                                       6
<PAGE>

The Company licenses rather than sells its software. The license agreements
impose certain restrictions on the licensees' ability to utilize the software.
The Company seeks to avoid disclosure of its trade secrets, including, but not
limited to, (i) requiring those persons with access to the Company's proprietary
information to execute confidentiality agreements with the Company and (ii)
restricting access to the Company's source codes. Trade secret and copyright
laws afford only limited protection.

Despite the Company's efforts to protect its proprietary rights, unauthorized
parties may attempt to copy the Company's proprietary products or to obtain and
use information that the Company regards as proprietary. Although the Company
may apply for certain patents, the Company presently has no patents or patent
applications pending. Policing unauthorized use of the Company's proprietary
products is difficult, and while the Company may be unable to determine the
extent to which piracy of its proprietary software products exists, software
piracy can be expected to be a persistent problem. In addition, the laws of some
foreign countries do not protect the Company's proprietary rights to as great an
extent as the laws of the United States.

There can be no assurance that the Company's means of protecting its proprietary
rights will be adequate or that the Company's competitors will not develop
similar technology independently. There can be no assurance that third parties
will not claim infringement by the Company with respect to current or future
proprietary products. The Company expects software product developers to be
increasingly subject to infringement claims as the number of proprietary
products and competitors in the Company's industry segment grows and the
functionality of proprietary products in different industry segments overlaps.
Any such claims, with or without merit, could be time-consuming, result in
costly litigation, cause product shipment delays or require the Company to enter
into royalty or licensing agreements. Such royalty or licensing agreements, if
required, may not be available on terms acceptable to the Company or at all,
which could have a material adverse effect upon the Company's business,
operating results and financial condition.

The Company also relies on certain software that it licenses from third parties.
There can be no assurance that such firms will remain in business, that they
will continue to support their products or that their products will otherwise
continue to be available to the Company on commercially reasonable terms.

Employees

As of March 14, 2003, the Company had a total of 56 employees, of which 41 were
technical professionals, 6 comprised the sales and marketing staff, and the
remainder were involved in management, corporate security, administration,
contracts, and accounting. The Company's employees are not represented by any
unions, and the Company has not experienced any work stoppages.

Recent Developments

On January 15, 2003, the Company issued a press release announcing the addition
of several executives to the management team. Norman Welsch joined the Company
as Chief Financial Officer and Corporate Secretary; Kathryn Hill was promoted to
Vice President of the Intelligence Division; and Troy Hartless joined the
Company as Vice President of Sales and Marketing.

On November 19, 2002, the Company issued a press release announcing the
appointment of Edwin Miller as President and Chief Executive Officer.

Item 2.  Description of Property

Throughout 2001 and during the first quarter of 2002, the Company leased 25,950
square feet of office space for its headquarters and operations in Fairfax,
Virginia. In March 2001, the Company sublet 2,018 square feet of office space to
a third party for the period of April 1, 2001 to July 31, 2003. Sublease
payments cover the Company's costs for that space up to July 31, 2003. In March
2002, the Company and the property owner entered into an agreement whereby 8,185
square


                                       7
<PAGE>

feet of office space was returned to the building owner effective April 2002.
The end of the lease on the remaining office space, July 31, 2003, remained
unchanged. Payments under the lease, net of approximately $28,000 of sublease
payments received, were approximately $433,000 in 2002, and are expected to be
approximately $242,000 in 2003. The Company is presently conducting lease
negotiations for office space in the Northern Virginia area to replace the
current expiring lease.

Item 3.  Legal Proceedings

The Company is presently not a party to any material legal proceedings.

Item 4.  Submission of Matters to a Vote of Security Holders

Not applicable.

Item 4a.  Executive Officers

The following information relates to executive officers of the Company as of
March 31, 2003.

      Name           Age                     Position
      ----           ---                     --------
Edwin A. Miller       33     President and Chief Executive Officer
Terry Anderson        56     Vice President, Government and Commercial Services
Troy Hartless         32     Vice President, Sales and Marketing
Kathryn P. Hill       68     Vice President, Intelligence
Laura L. Sullivan     31     Controller
Norman F. Welsch      55     Chief Financial Officer and Corporate Secretary
Noel F. Wolber        52     Chief Technology Officer

Mr. Edwin Miller joined Infodata in November 2002 as the President and CEO. Mr.
Miller comes to Infodata from Ikimbo, Inc., where he served as the President and
CEO. Prior to Ikimbo, Mr. Miller most recently served as President and COO of
XML Solutions. As a Co-Founder and Vice President of Conducent Technologies,
Inc., he held various positions in Technology, Finance and Accounting, and Sales
and Marketing. Mr. Miller began his career with PSINet, where he served various
roles in Sales, Marketing, International M&A, and Technology. Mr. Miller was
awarded a BS degree in Management with a dual minor in German and French by
Liberty University, and he received a MBA from the George Washington University.

Mr. Terry Anderson joined Infodata in 1995. Mr. Anderson has designed and
managed numerous Documentum projects for a wide range of customers. Previously,
Mr. Anderson managed software development projects at CACI and Automation
Research Systems. Mr. Anderson managed his first automation project in 1975, and
he has rich and varied background of experience with content management systems.
Mr. Anderson is a Certified Project Management Professional, and he holds an MBA
from Troy State University.

Mr. Troy Hartless joined Infodata in December 2002 as Vice President, Sales and
Marketing. Mr. Hartless was previously Executive Vice President of Solutions
Technology International, a software and services company providing reinsurance
contract management and technical accounting solutions to the Insurance
industry. Prior to Solution Technology International, Mr. Hartless served at
Ikimbo as Senior Vice President, Operations, and formerly as Vice President,
Product and Business Development. Prior to Ikimbo, Mr. Hartless was Sr.
Director, Product Marketing and customer service at Conducent, Inc. Mr. Hartless
also served for five years with Ericsson where he held various marketing and
product management positions. Mr. Hartless earned his BS degree in business
management from Liberty University.

Ms. Kathryn Hill joined Infodata in 1984 and serves as Vice President,
Intelligence division. During her tenure at Infodata, Ms. Hill has served in
various roles including technical consulting positions, Program Management, and
head of Intelligence Division Operations. Ms. Hill's career has focused on
providing content management solutions to the


                                       8
<PAGE>

intelligence community. Prior to Infodata, Ms. Hill served in technical
positions in the Research and Development divisions of Union Carbide Corporation
and General Electric. Ms. Hill holds a Bachelor of Arts degree in Mathematics
from Chestnut Hill College.

Ms. Laura Sullivan joined Infodata in December 2002 as Controller. Ms. Sullivan
most recently served as Manager, Business Center Operations for Innovative
Logistics Techniques, Inc., a privately held logistics firm. Prior to Innovative
Logistics Techniques, Inc., Ms. Sullivan served as the Assistant Controller for
CALIBRE Systems, Inc. for five years. Ms. Sullivan holds a Bachelor of Science
degree in Accounting and Finance from Palm Beach Atlantic University and is
currently pursuing her CPA.

Mr. Norman Welsch joined Infodata in January 2003 as Chief Financial Officer and
Corporate Secretary. Mr. Welsch most recently served as CFO and Treasurer of
Objective Interface Systems, Inc., a privately held embedded software solutions
provider. Mr. Welsch previously served as Vice President and CFO of Netrix
Corporation (NASDAQ), and Sr. VP and CFO of CBIS Federal, Inc. Prior to CBIS
Federal, Inc., Mr. Welsch held various senior management positions with various
high technology companies, including serving as Corporate Controller for C3,
Inc. (NYSE). Mr. Welsch holds a BS in Accounting from Benjamin Franklin
University and is a CPA.

Mr. Noel Wolber, Chief Technology Officer, joined the company in May of 1999. He
has held previous positions as Vice President of Technology for Ziff-Davis
Publishing, VP of Digital Image Systems at Computer Sciences Corporation, Vice
President of Virginia Operations for Lockheed Integrated Solutions Co. and Vice
President of Sales and Marketing for IA Corporation. He holds an undergraduate
degree with concentrations in Chemistry and Philosophy from the University of
Louisville and a Masters Degree from Harvard University.

PART II

Item 5.  Market for Common Equity and Related Stockholder Matters

From September 1994 to July 2001, the Company's Common Stock was quoted on the
NASDAQ SmallCap Market under the symbol "INFD". On July 19, 2001, the Company's
Common Stock was delisted from the Nasdaq SmallCap Market due to non-compliance
with that market's minimum net tangible assets requirement and commenced trading
on the NASD OTC Bulletin Board under the symbol "INFD".

The table below shows the range of closing sale prices for the Common Stock for
the quarters indicated.

                                  2002                    2001
                             --------------          --------------
                             High      Low           High      Low
                             -----    -----          -----    -----
     First Quarter           $1.00    $0.15          $1.63    $0.75
     Second Quarter           0.40     0.09           1.88     1.00
     Third Quarter            0.20     0.10           1.66     0.57
     Fourth Quarter           0.45     0.13           0.88     0.52

The market quotations reflected above are inter-dealer prices, without retail
mark-up, markdown or commissions and may not represent actual transactions.

The Company has not paid cash dividends on its Common Stock and presently has no
intention to do so. It believes that execution of its operating plan requires
the Company to retain available funds to support future business activities.
Payment of cash dividends on the Company's Common Stock in the future will be
dependent upon the earnings and financial condition of the Company, and other
factors, which the Board of Directors may deem appropriate.

                                       9
<PAGE>

As of March 18, 2003, there were approximately 654 record holders and 1,169
beneficial holders of the Company's Common Stock.

The following table sets forth information as of December 31, 2002, regarding
the Company's equity compensation plans.

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
                               Equity Compensation Plan Information

                                                                          Number of securities
                        Number of securities                             remaining available for
                            to be issued         Weighted-average         future issuance under
                          upon exercise of       exercise price of      equity compensation plans
                        outstanding options,    outstanding options,      (excluding securities
  Plan category         warrants and rights     warrants and rights      reflected in column (a))
  -------------         --------------------    --------------------    -------------------------
                                (a)                     (b)                         (c)
<S>                          <C>                      <C>                         <C>
Equity compensation
 plans approved by
 security holders            1,506,787                $1.283                      754,213

Equity compensation
 plans not approved
 by security holders                 -                     -                            -
                             ---------                ------                      -------

      Total                  1,506,787                $1.283                      754,213
                             =========                ======                      =======
</TABLE>


Item 6.  Management's Discussion and Analysis or Plan of Operations

FORWARD-LOOKING STATEMENTS CONTAINED IN THIS FORM 10-KSB RELATING TO PRODUCT AND
SERVICE DEVELOPMENT, FUTURE CONTRACTS, REVENUE, AND THE ADEQUACY OF WORKING
CAPITAL ARE BASED ON CURRENT EXPECTATIONS THAT INVOLVE UNCERTAINTIES AND RISKS
ASSOCIATED WITH NEW PRODUCT AND SERVICE SOLUTION OFFERINGS INCLUDING, BUT NOT
LIMITED TO, MARKET CONDITIONS, SUCCESSFUL PRODUCT DEVELOPMENT, SERVICE
INTRODUCTION AND ACCEPTANCE, THE INTRODUCTION OF COMPETITIVE PRODUCTS, ECONOMIC
CONDITIONS, AND THE TIMING OF ORDERS AND CONTRACT INITIATION. THE COMPANY'S
ACTUAL RESULTS MAY DIFFER MATERIALLY FROM CURRENT EXPECTATIONS. READERS ARE
CAUTIONED NOT TO PUT UNDUE RELIANCE ON FORWARD-LOOKING STATEMENTS. THE COMPANY
DISCLAIMS ANY INTENT OR OBLIGATION TO UPDATE PUBLICLY THESE FORWARD-LOOKING
STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.

Company Overview

The Company provides its customers with complex information technology solutions
in the area of content and document management, which includes content review,
content assembly and publishing, content transformation, content security and
content analytics. The Company provides software and integration solutions that
assist regulated businesses and controlled government agencies in constructing
or augmenting Enterprise Content Management (ECM) solutions. Revenues from
licensing proprietary software products include AnnoDoc, Compose, Signet,
Infodata Foundation Server, INQUIRE/Text software, WebINQUIRE, and their
associated maintenance and support. Further, the Company offers specific
vertical market solutions for life cycle management of content. The Company does
this by delivering a software services layer that enhances the capabilities of
content management systems. Revenues from third party products include software
and


                                       10
<PAGE>

hardware with some related services. The Company serves three markets with
consistent product and service offerings: Commercial, Government, and the
Intelligence Community.

The Company's revenues are derived from the sale of licenses for its proprietary
content management products and related maintenance and support; and services,
which include systems integration, consulting, and training surrounding the
implementation of the Company's proprietary products and third-party products;
and other professional and technical services. Revenues from license
arrangements are recognized upon contract execution, provided all shipment
obligations have been met, fees are fixed or determinable, and collection is
probable. If an ongoing vendor obligation exists under the license arrangement,
revenue is deferred based on vendor-specific objective evidence of the
undelivered element. If vendor-specific objective evidence does not exist for
all undelivered elements, all revenue is deferred until sufficient evidence
exists or all elements have been delivered. Revenues from consulting and
training are recognized when the services are performed and collectibility is
deemed probable. The Company recognizes revenue in accordance with Statement of
Position (SOP) 97-2, "Software Revenue Recognition", as amended. Revenue from
consulting services is recognized as the work progresses. Any amounts paid by
customers prior to the actual performance of services are recorded as deferred
revenue until earned, at which time they are recognized in accordance with the
type of contract. Payments received in advance of revenue recognition are
recorded as deferred revenue. Revenues from annual maintenance and support are
deferred and recognized ratably over the term of the contract.

For the year ended December 31, 2002, revenues from license fees and services
accounted for approximately 20.5% and 74.1% of total revenues, respectively.
During 2002, revenues derived from third party products represented 5.4% of
total revenues. For the year ended December 31, 2001, revenues from license fees
accounted for approximately 13.6%, and revenues from services accounted for
approximately 75.1%, of total revenues, respectively. During 2001, revenues
derived from third party products represented 11.3% of total revenues. For the
year ended December 31, 2002, total revenues decreased by approximately 36.9% as
compared to 2001.

Deferred revenue at December 31, 2002 was approximately $753,000, which was
primarily related to software maintenance agreements. The margins that will be
realized on transactions involving deferred revenue depend on the type of
service rendered by the Company. For the year ended December 31, 2002, the
Company's maintenance revenue was derived primarily from support agreements for
AnnoDoc, Compose, and INQUIRE/ Text.

The components of the Company's cost of revenue are dependent on the product or
service. For services, the most significant item is the direct labor cost. Other
cost components may include subcontractor costs, non-labor direct costs such as
travel, and associated indirect costs (e.g., office rent, administration, etc.)
allocated to the services engagement. Indirect costs are first allocated to
indirect cost pools based on head count and square footage of office space.
These aggregated pools are subsequently allocated to operating units and
projects in proportion to direct labor costs. For third party products and
associated maintenance, the cost of revenue includes the cost incurred by the
Company to acquire the product/service, shipping and delivery charges,
associated taxes, any customization work done by the Company, and any special
packaging costs incurred prior to shipment. The cost of maintenance revenue
includes the customer service and software engineering personnel supporting the
product and an allocation of associated indirect costs. Indirect costs are first
allocated to indirect cost pools based on head count and square footage of
office space. These aggregated pools are subsequently allocated to operating
units and projects in proportion to direct labor costs. For license revenues,
cost of revenue includes the shipping, delivery, packaging, production, direct
labor of personnel involved in delivering the product, and any associated
expenses involved with the installation of the product for the customer.

At December 31, 2002, the Company had net operating loss carryforwards ("NOLs")
aggregating approximately $13,096,000 available to affect future taxable income.
Under Section 382 of the Internal Revenue Code of 1986, as amended ("Code"),
utilization of prior NOLs is subject to certain limitations following a change
in ownership. As a result of the Company's prior acquisition of AMBIA
Corporation in 1997, the Company is subject to limitations on the use of its
NOLs. Accordingly, there can be no assurance that the Company will be able to
utilize a significant amount of its NOLs. Due to the uncertainty of the
Company's future taxable income against which the NOLs may be utilized, a full
valuation allowance has been established with respect to the NOLs as a deferred
tax asset.

                                       11
<PAGE>

On March 30, 2000, the Company acquired a business unit from Earth Satellite
Corporation specializing in providing software development services to the U.S.
government intelligence community. The Company issued 40,000 shares of its
Common Stock with a fair market value of $3.563 per share, which was equal to
the average of the closing bid and ask prices of the Company's Common Stock on
that date. On February 9, 2001, the Company issued an additional 13,334 shares
of its Common Stock with a fair market value of $1.50 per share, to Earth
Satellite Corporation pursuant to a working capital adjustment provision
included in the acquisition agreement between the Company and Earth Satellite
Corporation in this transaction, which resulted in a purchase price adjustment
of approximately $20,000 that was attributed to goodwill. The acquisition cost
of this business unit as of December 31, 2001 was approximately $199,000,
including approximately $37,000 of direct cost attributed to the business unit's
sole contract. The acquisition value of that contract was amortized over 18
months and as of December 31, 2002, the Company had fully amortized that amount.

The Company's future operating results may vary significantly and are difficult
to predict due to a number of factors, of which many are beyond its control.
These factors include the demand for the Company's services and proprietary
products, the level of product and price competition; the length of the
consulting services sales cycle; the delay or deferral of customer
implementation; the success of the direct and indirect sales force and the
Company's channel partners; the mix of products and services sold; the timing of
hiring of new employees and/or consultants; the ability of the Company to
control costs; and general domestic economic and political conditions which
could have an adverse effect on the Company's ability to meet its operating
goals.

Significant Estimates and Critical Accounting Policies

The preparation of consolidated financial statements requires management to make
judgments based upon estimates and assumptions that are inherently uncertain.
The following is a summary of the Company's most critical accounting policies
and significant estimates used in the preparation of the consolidated financial
statements.

Revenue Recognition - Long-Term Contracts

A portion of the Company's revenues is derived primarily from long-term
contracts. Revenues on time and material contracts with a maximum price per
labor hour or not to exceed limit are based on the level of effort billed to the
customer up to the maximum price or not to exceed limit. Revenues on long-term
fixed-price contracts are generally recognized using the
percentage-of-completion method of accounting. Such revenues are recorded based
on the percentage that costs incurred in the applicable reporting period bear to
the most recent estimates of total costs to complete each contract. Estimating
future costs and, therefore, revenues and profits, is a process requiring a high
degree of management judgment, including management's assumptions regarding
future operations of the Company as well as general economic conditions. In the
event of a change in total estimated contract cost or profit, the cumulative
effect of such change is recorded in the period the change in estimate occurs.
Frequently, the period of performance of a contract extends over a long period
of time and, as such, revenue recognition and profitability from a particular
contract may be adversely affected to the extent that estimated cost to complete
or award fee estimates are revised, delivery schedules are delayed, or progress
under a contract is otherwise impeded. Accordingly, revenues and gross profits
from year to year can fluctuate significantly. In the event that cost estimates
indicate a loss on a contract, the total amount of such loss is recorded in the
period in which the loss is first estimated.

Certain contracts include award fee provisions for increased or decreased
revenue and profit based on actual performance against established targets.
Award fees are included in estimated contract revenue at the time the amounts
can be reasonably determined and are reasonably assured based on historical
experience and other objective criteria. Should the Company fail to perform
sufficiently under such contracts, previously recognized revenues could be
reversed and/or future period revenues could be reduced.

                                       12
<PAGE>

Software Revenue Recognition

The Company recognizes revenue from the sale of software licenses in accordance
with Statement of Position No. 97-2, "Software Revenue Recognition", as amended.
Revenue from license arrangements is recognized upon shipment of the product
when persuasive evidence of an arrangement exists, delivery has occurred, the
fee is fixed and determinable and collectibility is deemed probable. If an
ongoing vendor obligation exists under the license arrangement, revenue is
deferred based on vendor-specific objective evidence of the undelivered element.
If vendor-specific objective evidence does not exist for all undelivered
elements, all revenue is deferred until sufficient evidence exists or all
elements have been delivered. Revenue from annual maintenance and support,
including third party software maintenance, is deferred and recognized ratably
over the term of the contract.

Deferred Tax Assets

The Company has recorded a full valuation allowance to reduce its deferred tax
assets to the amount that is more likely than not to be realized. In the event
the Company determines that the deferred tax assets may be realized in the
future in excess of the net recorded amount, an adjustment to the deferred tax
valuation allowance would increase income in the period such determination is
made.

CONSOLIDATED RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2002 AND
2001

Results of Operations

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

Revenues

The Company has changed its reportable business segments as a result of the
change in management, which occurred in the fourth quarter of 2002. The
Company's new management team is focused on selling solutions to Commercial,
Government, and Intelligence Community customers, with sales and marketing
efforts focused on providing solutions in and around content review, content
assembly and publishing, content security, content transformation, and content
analytics within these business units. As such, internal financial reporting
that is provided to the chief operating decision-maker is evaluated along these
lines of business. The solution offerings are services, proprietary products,
and third party products. Services revenues are derived from specific vertical
market solutions by delivering a software services layer that enhances the
capabilities of content management systems. License revenues are derived from
the licensing of proprietary software products and their associated maintenance
and support. Third party revenues include software licenses and hardware with
some related services.


                                       13
<PAGE>

For the year ended December 31, 2002, total revenue decreased by approximately
$5,723,000, or 36.9%, to approximately $9,802,000, down from approximately
$15,525,000 for the year ended December 31, 2001. Revenues for each period
consisted of the following:

                                    Revenues
                           for the Twelve Months Ended
                          (Dollar Amounts in Thousands)

                               December 31,     December 31,       Increase
                                   2002             2001         (Decrease) %
                               ------------     ------------     ------------
                 Commercial
                 ----------
                   Services      $ 1,300          $  1,965          (33.9)%
               License fees        1,854             1,971           (5.9)%
       Third party products            -               159         (100.0)%
                             ------------------------------------------------
  Total Commercial Revenues      $ 3,154          $  4,095          (23.0)%
                             ================================================

                 Government
                 ----------
                   Services      $ 1,317          $  1,538          (14.3)%
               License fees          158               108           46.5 %
       Third party products          441             1,393          (68.4)%
                             ------------------------------------------------
  Total Government Revenues      $ 1,916          $  3,039          (36.9)%
                             ================================================

               Intelligence
               ------------
                   Services      $ 4,645          $  8,154          (43.0)%
               License fees            -                33         (100.0)%
       Third party products           87               204          (57.5)%
                             ------------------------------------------------
Total Intelligence Revenues      $ 4,732          $  8,391          (43.6)%
                             ================================================
             Total Revenues      $ 9,802          $ 15,525          (36.9)%
                             ================================================


For the year ended December 31, 2002, total revenues for the Commercial segment
were approximately $3,154,000, a decrease of approximately $941,000, or 23.0%,
from total revenues of approximately $4,095,000 for the year ended December 31,
2001. The decrease was primarily the result of the completion of two large
commercial services contracts in 2001 that were not replaced by new business.

In the Government segment, total revenues were approximately $1,916,000 for the
year ended December 31, 2002, a decrease of approximately $1,123,000, or 36.9%,
from total revenues of approximately $3,039,000 for the year ended December 31,
2001. The decrease was primarily the result of the decline in sales of third
party products as the Company focused primarily on the sales of its
higher-margin proprietary products.

For the year ended December 31, 2002, total revenues for the Intelligence
segment were approximately $4,732,000, a decrease of approximately $3,659,000,
or 43.6%, from total revenues of approximately $8,391,000 for the year ended
December 31, 2001. The decrease was primarily related to the termination of the
Company's largest contract by a U.S. Government Agency. One U.S. Government
intelligence customer accounted for approximately $3,244,000, or 33.1%, of the
Company's 2002 revenues, and approximately $ 6,429,000, or 41.4%, of the
Company's 2001 revenues. On March 1, 2002, the major U.S. Government
intelligence customer notified the Company that the scope of its largest
contract was going to be substantially reduced. During the quarters ended March
31, 2002, June 30, 2002, and September 30, 2002, this contract accounted for
approximately $1,319,000, $502,000, and $47,000 of revenues, respectively, or
approximately $1,868,000, or 19.1%, of total revenues for the year ended
December 31, 2002. On April 26, 2002, the U.S. Government Agency delivered a
unilateral contract modification to the Company agreeing to an equitable
adjustment of $47,105


                                       14
<PAGE>

related to the de-scope and termination of the contract. In May of 2002, another
contract with the same customer commenced, and for the quarters ended June 30,
2002, September 30, 2002, and December 31, 2002, accounted for approximately
$380,000, $492,000, and $503,000 of revenues, respectively, or approximately
$1,375,000, or 14.0%, of total revenues for the year ended December 31, 2002.

Gross Profit

Gross profit for the year ended December 31, 2002 increased by approximately
$368,000, or 11.0%, to approximately $3,709,000, from approximately $3,341,000
for the year ended December 31, 2001. The gross margin was 37.8% and 21.5% for
the years ended December 31, 2002 and 2001, respectively. This year over year
increase in gross margin of approximately 16.3% despite a significant decrease
in revenues was primarily the result of the reduction and control of operating
expenses after the termination of the Company's largest Intelligence contract,
combined with the significant reduction of third party product sales which
generate nominal margin.

Research and Development Expenses

Research and development expenses for the year ended December 31, 2002 increased
approximately $244,000, or 50.1%, to approximately $731,000, up from
approximately $487,000 for the year ended December 31, 2001. The overall
increase was due to the Company's decision to increase spending for the
development and enhancement of new and existing proprietary software products.

Selling, General and Administrative Expenses

For the year ended December 31, 2002, Selling, general and administrative
expenses were approximately $2,267,000, a decrease of approximately $1,769,000,
or 43.8%, from approximately $4,036,000 for the year ended December 31, 2001.
The decrease was primarily due to reductions in selling, general and
administrative personnel costs, rent expense, and other expenditures during
2002.

Gain on Sale of Investment

On February 9, 2001, the Company sold its holdings of common stock and preferred
stock of Buckaroo.com, Inc., a Silicon Valley-based on-line commodity exchange
site that serves the computer chip market, to six private investors for a total
of $1,092,740 in cash. The Company originally obtained such shares in July 1999
for $24,575. As a result of the sale of such shares, the Company recorded a gain
of $1,068,165 during the first quarter of 2001.

Interest Income and Expense

For the year ended December 31, 2002, Interest income decreased approximately
$41,000 to approximately $11,000, from approximately $52,000 for the year ended
December 31, 2001. The decrease was due to lower balances in short-term
investments during the year ended December 31, 2002, as well as lower interest
rates applied to cash and cash equivalent balances throughout the year.

For the year ended December 31, 2002, Interest expense decreased approximately
$54,000 to approximately $34,000, from approximately $88,000 for the year ended
December 31, 2001. The decrease was due to lower credit facility balances during
2002, and approximately $34,000 in late fees incurred in 2001 that were not
incurred in 2002.

Liquidity and Capital Resources

At December 31, 2002, the Company had cash and cash equivalents of approximately
$1,298,000 and net working capital of approximately $1,562,000. At December 31,
2001, the Company had cash and cash equivalents of approximately $1,002,000 and
net working capital of approximately $741,000. The 2002 increase in cash and
cash equivalents of approximately $296,000 and in working capital of
approximately $821,000 was primarily the result the of the Company's


                                       15
<PAGE>

return to sustained profitability beginning in the second quarter combined with
the reduction and control of operating expenses. As of March 14, 2003 the
Company had cash and cash equivalents of approximately $1,394,000.

On June 3, 2002, the Company entered into a one-year Assignment and Transfer of
Receivables Agreement (the "Agreement") to assign its eligible receivables to
Commerce Funding Corporation ("CFC") up to $1,000,000. Pursuant to the terms of
the Agreement, CFC has sole discretion in determining the receivables that are
eligible for assignment, and the Agreement is collateralized by a security
interest in all receivables owned or thereafter acquired, including all contract
rights, proceeds and returned goods thereof, and all accounts and cash
maintained by the Company with any bank or financial institution. The Agreement
may be terminated by either party at any time, by giving a thirty-day written
notice to the other party. CFC may terminate the Agreement at any time if the
Company commits any event of default. Interest under the Agreement is to be paid
semi-monthly at Prime +1.75 percentage points, in addition to processing fees of
..65% of gross invoice amounts for the first thirty days a receivable is
assigned. The Company is required to pay a minimum charge of approximately
$2,000 per month for interest and processing fees, which is deductible from the
actual interest and processing fees due for the month. As of December 31, 2002,
the Company had outstanding borrowings under the Agreement of approximately
$55,000.

The Company previously had a working capital line of credit with Merrill Lynch
Business Financial Services Inc. ("Merrill Lynch") collateralized by accounts
receivable, equipment, and other intangibles, that expired on April 30, 2001,
thus accelerating all amounts due under this line of credit. As of December 31,
2001, the Company had outstanding borrowings of approximately $616,000. As of
May 30, 2002, the Company had fully repaid all amounts outstanding under the
line of credit with Merrill Lynch.

For the year ended December 31, 2002, net cash provided by operating activities
was approximately $972,000, which was primarily the result of the Company's net
income of approximately $688,000. For the year ended December 31, 2001, net cash
used by operations was approximately $816,000, which was primarily attributable
to the Company's operating loss of approximately $1,182,000 for the year, which
was partially offset by the collection of a related party receivable of
approximately $289,000 from Claria Corporation. For the year ended December 31,
2002, net cash used in financing activities was approximately $550,000, which
was primarily used for repayment of the outstanding balance on the Merrill Lynch
line of credit. For the year ended December 31, 2001, net cash provided by
investing activities was approximately $1,569,000, which was primarily the
result of proceeds from the sale of the Company's investment in Buckaroo.com,
Inc. of approximately $1,092,000 combined with net proceeds from the maturity of
investments of approximately $500,000.

The Company's continuation as a going concern is dependent on, among other
things, its ability to remain profitable and control expenses, and meet its 2003
budgeted cash flow projections. The Company's actual cash requirements may vary
materially from those now planned and will depend upon numerous factors,
including the general market acceptance of the Company's proprietary products
and services, the growth of the Company's marketing channels, the technological
advances and activities of competitors, and other factors.

The Company has had a history of operating and cash flow losses. Management has
taken a number of actions in 2002, including reductions in force and other
cost-cutting measures, to restore the Company to positive operations and cash
flows. As a result of these efforts, the Company had three consecutive
profitable quarters during 2002. Additionally, management was able to obtain
receivable financing for working capital requirements. Management believes that
existing cash, short-term investments, and the credit facility will be
sufficient to fund working capital requirements for 2003.

Termination of Agreement of Merger

On January 10, 2002, the Company entered into an Agreement and Plan of Merger
(the "Agreement of Merger") between the Company and Science Applications
International Corporation ("SAIC") and Info Acquisition Corp., a Delaware
corporation and wholly-owned subsidiary of SAIC ("Acquisition"). Pursuant to the
Agreement of Merger, SAIC was to acquire all of the issued and outstanding
common stock of the Company through the merger (the "Merger") of Acquisition
with and into the Company.

                                       16
<PAGE>

At a meeting of the Company's shareholders held on March 1, 2002, the
shareholders of the Company approved the Agreement of Merger. However,
consummation of the Merger was delayed after its major U.S. Government
intelligence customer notified the Company that the scope of a large contract
(the "Customer Contract"), which accounted for approximately 40% of the
Company's revenue in 2001, was going to be substantially reduced. Although the
Company believes that it had performed well under the Customer Contract, and in
fact subsequently received a 99% award fee rating on its performance, the terms
of the Customer Contract provide the government customer the right to change the
scope of its services engagement, which right is typical in virtually all
government contracts.

In January 2002, pursuant to the terms of the Agreement of Merger, the Company's
Board of Directors adopted a resolution to suspend the 1997 Employee Stock
Purchase Plan during the first quarter of 2002 and to subsequently terminate it
upon the consummation of the Merger.

On April 19, 2002, the Company received a notice from SAIC terminating its
proposed acquisition of the Company pursuant to the Agreement of Merger. As per
the Agreement of Merger, the Company may be required to pay a termination fee of
$50,000 to SAIC under certain specific conditions. Management does not believe
that these conditions exist, and has been advised orally that SAIC does not
intend to pursue the termination fee, and accordingly, this amount has not been
accrued for in the accompanying consolidated financial statements.

Settlement Related to Termination of Government Contract

On April 26, 2002, the Company submitted a settlement proposal to a U.S.
Government Agency client in an effort to recover termination costs. On April 26,
2002, the U.S. Government Agency delivered a unilateral contract modification to
the Company agreeing to an equitable adjustment of $47,105 related to the
de-scope and termination of the contract. The Company has subsequently received
all balances due under the contract.

As a result of the termination of the Customer contract, the Company has taken
certain steps to control its expenses, including reducing the number of its
employees, and reducing rent expense and expenditures in other areas.

Termination of Chief Executive Officer

On May 20, 2002, the Company's President and Chief Executive Officer, Stephen
Samowich, left the Company. On August 2, 2002, Mr. Samowich agreed to a lump-sum
severance payment of approximately $109,000, which was paid and expensed by the
Company in the quarter ended September 30, 2002.

On August 8, 2002, Harry Kaplowitz, who was then serving as Executive Vice
President of the Company in charge of its Intelligence business, was appointed
President and Chief Executive Officer. However, Mr. Kaplowitz and the Company's
Board of Directors were unable to agree on the terms of an employment agreement.
On September 4, 2002, Mr. Kaplowitz resumed his position as Executive Vice
President and assumed an expanded role including all commercial and government
IT consulting operations in addition to the Intelligence business. On February
9, 2003 Mr. Kaplowitz resigned to accept an executive position at another
company.

On September 4, 2002, Richard T. Bueschel, the chairman of the Board of
Directors, was appointed acting Chief Executive Officer of the Company, until
November 15, 2002, at which time Edwin A. Miller was appointed President and
Chief Executive Officer.

Employment Agreement

On November 19, 2002, Edwin A. Miller joined the Company as President and Chief
Executive Officer, and was subsequently elected a Director. Pursuant to the
terms of his employment agreement dated as of November 15, 2002, Mr. Miller
receives an annual salary of $180,000, and a cash incentive bonus of $120,000 if
the Company's achieves certain performance criteria as approved by the Board of
Directors. Mr. Miller was issued 100,000 shares of restricted common stock of
the Company and granted an incentive stock option to purchase 150,000 shares of
common stock, which vests over a three-year period. The employment agreement
provides that in the event Mr. Miller is terminated without cause, he is to

                                       17
<PAGE>

receive a minimum lump-sum severance payment of six weeks of salary, up to a
maximum severance payment of six months of salary, depending on his term of
employment with the Company at the point of termination.

Contingencies

Costs charged to cost-type U.S. Government contracts are subject to annual audit
by the Defense Contract Audit Agency or other duly authorized representatives of
the U.S. Government. No audits have been completed for any periods commencing
after 1998. In January 2003, the audit commenced for the years 1999 - 2001 and
is still ongoing. In the opinion of management, adjustments resulting from the
completion of such audits and future audits are not expected to have a material
impact on the Company's financial position or results of future operations.

The Company has been notified by the Department of Labor that its employee
benefit plan (the "Benefit Plan") which qualifies under Section 401(k), for plan
year ended December 31, 2000, was required to have an independent Accountant's
Opinion rendered on the Benefit Plan's financial statements to be issued no
later than October 15, 2001. The Audit Committee is evaluating bids received
from two independent accounting firms. Failure to file these forms on time could
result in government penalties up to $1,100 per day. The likelihood or amount of
penalties, if any, that might be imposed has not been determined, and
accordingly, an amount has not been accrued for in the accompanying consolidated
financial statements.

On April 19, 2002, the Company received a notice from Science Applications
International Corporation ("SAIC") terminating its proposed acquisition of the
Company pursuant to the Agreement of Merger. As per the Agreement of Merger, the
Company may be required to pay a termination fee of $50,000 to SAIC under
certain specific conditions. Management does not believe that these conditions
exist, and has been advised orally by SAIC that it does not intend to pursue the
termination fee, and accordingly, this amount has not been accrued for in the
accompanying consolidated financial statements.

From time to time, the Company is subject to claims arising in the ordinary
course of business. In the opinion of management, no such matter, individually
or in the aggregate, exists which is expected to have a material effect on the
results of operations, cash flows or financial position of the Company.

Item 7.  Financial Statements

The consolidated financial statements required hereunder are listed under Item
13(a) below.

Item 8.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure

On December 5, 2002, the Company filed a Form 8-K with the U.S. Securities and
Exchange Commission, stating that effective as of December 5, 2002, the Company
dismissed its prior certifying accountants, PricewaterhouseCoopers LLP and
retained as its new certifying accountants, Grant Thornton LLP. For the year
ended December 31, 2001, the report by PricewaterhouseCoopers LLP contained an
explanatory paragraph relating to the Company's ability to continue as a going
concern. During the Company's two most recent years, there were no disagreements
with the former accountant on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements if not resolved to their satisfaction would have caused them to
make reference in connection with their opinion to the subject matter of the
disagreement. Upon receipt of approval of the Audit Committee of the Company's
Board of Directors, the Company engaged Grant Thornton LLP. During the Company's
two most recent years, and during any subsequent period through December 5,
2002, the Company did not consult with Grant Thornton LLP on any accounting or
auditing issues.

The Company has authorized PricewaterhouseCoopers LLP to respond fully to any
inquiries by Grant Thornton LLP concerning the above.

                                       18
<PAGE>

PART III

Item 9.   Directors, Executive Officers, Promoters and Control Persons;
          Compliance With Section 16(a) of the Exchange Act

Pursuant to General Instruction E (3) of Form 10-KSB, the information called for
by Item 9 relating to the Company's directors is hereby incorporated by
reference from the Company's definitive proxy statement to be filed pursuant to
Regulation 14A not later than 120 days after the end of the fiscal year covered
by this report. Information regarding the Company's executive officers is set
forth under Item 4a of this Form 10-KSB.

Item 10.  Executive Compensation

Pursuant to General Instruction E (3) of Form 10-KSB, the information called for
by Item 10 is hereby incorporated by reference from the Company's definitive
proxy statement to be filed pursuant to Regulation 14A not later than 120 days
after the end of the fiscal year covered by this report.

Item 11.  Security Ownership of Certain Beneficial Owners and Management and
          Related Shareholder Matters

Pursuant to General Instruction E (3) of Form 10-KSB, the information called for
by Item 11 is hereby incorporated by reference from the Company's definitive
proxy statement to be filed pursuant to Regulation 14A not later than 120 days
after the end of the fiscal year covered by this report.

Item 12.  Certain Relationships and Related Transactions

Pursuant to General Instruction E (3) of Form 10-KSB, the information called for
by Item 12 is hereby incorporated by reference from the Company's definitive
proxy statement to be filed pursuant to Regulation 14A not later than 120 days
after the end of the fiscal year covered by this report.

Item 13.  Exhibits, List and Reports on Form 8-K

     (a)  Financial Statements. The financial statements and exhibits required
          by Item 7 and this Item 13 of Form 10-KSB are listed below.

          Index to Consolidated Financial Statements:                     Page
                                                                         -----
          Reports of Independent Accountants - Grant Thornton LLP
           and PricewaterhouseCoopers LLP............................... 21-22

          Consolidated Statements of Operations - for the years ended
           December 31, 2002 and 2001...................................    23

          Consolidated Balance Sheets - December 31, 2002 and 2001...... 24-25

          Consolidated Statements of Shareholders' Equity - for the

           years ended December 31, 2002 and 2001.......................    26

          Consolidated Statements of Cash Flows for the years ended
           December 31, 2002 and 2001...................................    27

          Notes to Consolidated Financial Statements - December 31,
           2002 and 2001................................................ 28-40

                                       19
<PAGE>

(b)  Reports on Form 8-K

On December 5, 2002, the Company filed a Form 8-K with the U.S. Securities and
Exchange Commission, stating that effective as of December 5, 2002, the Company
dismissed its prior certifying accountants, PricewaterhouseCoopers LLP and
retained as its new certifying accountants, Grant Thornton LLP. For the year
ended December 31, 2001, the report by PricewaterhouseCoopers LLP contained an
explanatory paragraph relating to the Company's ability to continue as a going
concern. During the Company's two most recent years, there were no disagreements
with the former accountant on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements if not resolved to their satisfaction would have caused them to
make reference in connection with their opinion to the subject matter of the
disagreement. Upon receipt of approval of the Audit Committee of the Company's
Board of Directors, the Company engaged Grant Thornton LLP. During the Company's
two most recent years, and during any subsequent period through December 5,
2002, the Company did not consult with Grant Thornton LLP on any accounting or
auditing issues.

The Company has authorized PricewaterhouseCoopers LLP to respond fully to any
inquiries by Grant Thornton LLP concerning the above.

Item 14.  Controls and Procedures

Within the 90-day period prior to the filing of this report, an evaluation was
carried out under the supervision and with the participation of the Company's
management, including our Chief Executive Officer and Chief Financial Officer,
regarding the effectiveness of our disclosure controls and procedures (as
defined in Rule 13(a)-14(c) and 15(d) under the Securities Exchange Act of
1934). As a result of their evaluation, our Chief Executive Officer and Chief
Financial Officer have concluded that the Company's disclosure controls and
procedures are effective to ensure that information required to be disclosed by
the Company in reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commission rules and forms. Subsequent to the
date of their evaluation, there were no significant changes in the Company's
internal controls, including any corrective actions with regard to significant
deficiencies and material weaknesses.


                                       20
<PAGE>

                        Report of Independent Accountants

To the Board of Directors and Shareholders of Infodata Systems Inc. and
Subsidiaries

We have audited the accompanying consolidated balance sheet of Infodata Systems
Inc. and Subsidiaries as of December 31, 2002, and the related consolidated
statement of operations, stockholders' equity, and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Infodata Systems
Inc. and Subsidiaries as of December 31, 2002, and the results of its operations
and its cash flows for the year then ended in conformity with accounting
principles generally accepted in the United States of America.




/s/ Grant Thornton LLP
Vienna, VA
March 14, 2003


                                       21
<PAGE>

                        Report of Independent Accountants


To the Board of Directors and Shareholders of Infodata Systems Inc.

In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of shareholders' equity and of cash flows
present fairly, in all material respects, the financial position of Infodata
Systems Inc. and its subsidiaries at December 31, 2001, and the results of their
operations and their cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of America. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
auditing standards generally accepted in the United States of America, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provide a reasonable
basis for our opinion.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements which appear in the Infodata Systems Inc.
Annual Report on Form 10-KSB/A for the year ended December 31, 2001, the Company
has suffered recurring losses from operations and its credit facility expired on
April 30, 2001 accelerating all amounts due under the line that raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.




/s/ PricewaterhouseCoopers LLP
McLean, Virginia
April 5, 2002


                                       22
<PAGE>

                     INFODATA SYSTEMS INC. AND SUBSIDIARIES
                      Consolidated Statements of Operations
                      (In thousands, except per share data)

                                                                 Year Ended
                                                                December 31,
                                                            -------------------
                                                              2002       2001
                                                            --------   --------
Revenue...................................................  $ 9,802    $15,525

Cost of revenue...........................................    6,093     12,184
                                                            -------    -------

   Gross profit...........................................    3,709      3,341
                                                            -------    -------

Operating expenses:
   Research and development...............................      731        487
   Selling, general and administrative....................    2,267      4,036
                                                            -------    -------

                                                              2,998      4,523
                                                            -------    -------

   Operating profit (loss)................................      711     (1,182)

Gain on sale of investment................................        -      1,068

Interest income...........................................       11         52
Interest expense..........................................      (34)       (88)
                                                            -------    -------

Income (loss) before income taxes.........................  $   688    $  (150)

Provision for income taxes................................        -          -
                                                            -------    -------

Net income (loss) ........................................  $   688    $  (150)
                                                            =======    =======

Net income (loss) per share - basic.......................  $   .14    $  (.03)
                                                            =======    =======

Net income (loss) per share - diluted.....................  $   .13    $  (.03)
                                                            =======    =======

Weighted average shares outstanding - basic ..............    4,835      4,749
                                                            =======    =======

Weighted average shares outstanding - diluted ............    4,965      4,749
                                                            =======    =======

                     The accompanying notes are an integral
                part of these consolidated financial statements.

                                       23
<PAGE>

                     INFODATA SYSTEMS INC. AND SUBSIDIARIES
                           Consolidated Balance Sheets
                 (In thousands, except share and per share data)

Assets
------                                                         December 31,
                                                            ------------------
                                                              2002       2001
                                                            -------    -------
Current assets:

   Cash and cash equivalents..............................  $ 1,298    $ 1,002

   Certificates of deposit ...............................      100          -

   Accounts receivable, net of allowance of
    $38 in 2002 and $35 in 2001...........................    1,806      2,994

   Prepaid expenses and other current assets..............       64        447
                                                            -------    -------

       Total current assets...............................    3,268      4,443
                                                            -------    -------

Property and equipment, net ..............................       79        185

Other assets..............................................       20         20
                                                            -------    -------

Total assets..............................................  $ 3,367    $ 4,648
                                                            =======    =======


                     The accompanying notes are an integral
                part of these consolidated financial statements.


                                       24
<PAGE>

                     INFODATA SYSTEMS INC. AND SUBSIDIARIES
                           Consolidated Balance Sheets
                                   (Continued)
                 (In thousands, except share and per share data)

Liabilities and Shareholders' Equity
------                                                         December 31,
                                                          ---------------------
                                                             2002        2001
                                                          ---------   ---------
Current liabilities:
   Line of credit                                         $     55    $    616
   Accounts payable                                             91       1,223
   Accrued expenses                                            806       1,116
   Deferred revenue                                            753         747
                                                          --------    --------

       Total current liabilities                             1,705       3,702
                                                          --------    --------

Commitments and contingencies (Note 8)

Shareholders' equity:

   Preferred stock, $1.00 par value, 340,000
    shares authorized, none issued and outstanding               -           -

   Common stock, $.03 par value, 12,000,000
    shares authorized; 4,986,572 and 4,794,140
    shares issued and outstanding in 2002 and
    2001, respectively                                         148         142

   Additional paid-in capital                               20,243      20,221

   Accumulated deficit                                     (18,729)    (19,417)
                                                          --------    --------

Total shareholders' equity                                   1,662         946
                                                          --------    --------

Total liabilities and shareholders' equity                $  3,367    $  4,648
                                                          ========    ========


                     The accompanying notes are an integral
                part of these consolidated financial statements.


                                       25
<PAGE>

<TABLE>
                                  INFODATA SYSTEMS INC. AND SUBSIDIARIES
                             Consolidated Statements of Shareholders' Equity
                                    (In thousands, except share data)


<CAPTION>
                                                               Additional                       Total
                                            Common Stock        Paid-In      Accumulated    Shareholders'
                                          Shares     Amount     Capital        Deficit         Equity
                                        ---------    ------    ----------    -----------    -------------

<S>                                     <C>           <C>       <C>           <C>             <C>
Balance at December 31, 2000.....       4,705,174     $ 141     $ 20,161      $ (19,267)      $ 1,035

Employee stock purchase plan.....          75,632         1           40             --            41

Earthsat acquisition.............          13,334        --           20             --            20

Net loss.........................              --        --           --           (150)         (150)
                                        ---------     -----     --------      ---------       -------

Balance at December 31, 2001.....       4,794,140     $ 142     $ 20,221      $ (19,417)      $   946

Employee stock purchase plan.....           8,317         1           --             --             1

Stock Option Exercise............          84,115         2            8             --            10

Stock Grant......................         100,000         3           14             --            17

Net income.......................              --        --           --            688           688
                                        ---------     -----     --------      ---------       -------

Balance at December 31, 2002.....       4,986,572     $ 148     $ 20,243      $ (18,729)      $ 1,662
                                        =========     =====     ========      =========       =======


         The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>


                                                 26
<PAGE>

                              INFODATA SYSTEMS INC.
                    Consolidated Statements of Cash Flows...
                                 (In thousands)

                                                                  Year Ended
                                                                 December 31,
                                                              ------------------
                                                                2002      2001
                                                              --------  --------
Cash Flows From Operating Activities:
   Net income (loss) .......................................  $   688   $  (150)
   Adjustments to reconcile net income (loss)
    to net cash used in operating activities:
      Stock based compensation expense......................       17         -
      Gain on sale of investment ...........................        -    (1,068)
      Depreciation and amortization.........................      131       147
      Goodwill and other intangible amortization............        -       117
      Accrued interest on line of credit....................        -         7
      Provision for doubtful accounts ......................      (10)      (11)
      Payments received on related party receivable.........        -       289
      Discount on related party receivable .................        -        13
      Changes in operating assets and liabilities
      Accounts receivable...................................    1,198      (400)
      Prepaid expenses and other assets.....................      383      (345)
      Accounts payable .....................................   (1,132)      635
      Accrued expenses......................................     (309)     (207)
      Deferred revenue......................................        6       157
                                                              -------   -------
         Net cash provided (used) by operating
          activities........................................      972      (816)
                                                              -------   -------

Cash Flows From Investing Activities:
      Purchases of property and equipment...................      (26)      (28)
      Purchases of short-term investments...................     (100)     (200)
      Proceeds from sale of investment......................        -     1,092
      Business acquisition costs............................        -         5
      Proceeds from maturity of short-term
       investments..........................................        -       700
                                                              -------   -------
         Net cash provided (used) by investing
          activities........................................     (126)    1,569
                                                              -------   -------

Cash Flows From Financing Activities:
      Net repayments under short-term debt                       (561)     (113)
      Issuance of common stock .............................       11        41
                                                              -------   -------
         Net cash used by financing activities..............     (550)      (72)
                                                              -------   -------

Net increase in cash and cash equivalents...................      296       681
Cash and cash equivalents at beginning of period............    1,002       321
                                                              -------   -------

Cash and cash equivalents at end of period..................  $ 1,298   $ 1,002
                                                              =======   =======


                     The accompanying notes are an integral
                part of these consolidated financial statements.

                                       27
<PAGE>

NOTE 1.  Summary of Significant Accounting Policies

Nature of Business

The Company, a Virginia corporation, is an information technology solutions firm
that designs, develops and implements content and document management solutions
for Commercial, Government, and Intelligence Community clients. The Company
provides its customers with complex information technology solutions in the area
of content and document management, which include content review, content
assembly and publishing, content transformation, content security and content
analytics. The Company provides enterprise software and integration solutions
that assist regulated businesses and controlled government agencies in
constructing or augmenting Enterprise Content Management (ECM) solutions.
Revenues are derived from licensing proprietary software products and their
associated maintenance and support, from services providing specific vertical
market solutions in the content management space for the management of the full
life cycle of content, and from sales of third party products.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of
Infodata Systems Inc. and its wholly owned subsidiaries (collectively referred
to herein as the "Company"). All significant intercompany accounts and
transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Revenue Recognition

The Company recognizes revenue from the sale of software licenses in accordance
with Statement of Position No. 97-2, "Software Revenue Recognition", as amended.
Revenue from license arrangements is recognized upon shipment of the product
when persuasive evidence of an arrangement exists, delivery has occurred, the
fee is fixed and determinable and collectibility is deemed probable. If an
ongoing vendor obligation exists under the license arrangement, revenue is
deferred based on vendor-specific objective evidence of the undelivered element.
If vendor-specific objective evidence does not exist for all undelivered
elements, all revenue is deferred until sufficient evidence exists or all
elements have been delivered. Revenue from annual maintenance and support,
including third party software maintenance, is deferred and recognized ratably
over the term of the contract. Revenue from consulting and training is deferred
and recognized when the services are performed and collectibility is deemed
probable. Revenue from consulting and professional services contracts is
recognized on the percentage-of-completion method for fixed price contracts and
on the basis of hours incurred at contract rates for time and materials
contracts. Revenue from cost reimbursement contracts is recognized as costs are
incurred. Any amounts paid by customers prior to the actual performance of
services are recorded as deferred revenue until earned, at which time the
amounts are recognized in accordance with the type of contract.

Revenue from government customers represented 67.8% of revenue in 2002 and 73.6%
in 2001. Revenue from one U.S. Government intelligence customer accounted for
33.1% of the Company's 2002 revenue, and 41.4% of the Company's 2001 revenue.
Revenue from non-U.S. customers totaled approximately $212,000 and $263,000 for
the years ended December 31, 2002 and 2001, respectively.

                                       28
<PAGE>

Stock Compensation

Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), encourages, but does not require, companies to
record compensation cost for stock-based employee compensation plans at fair
value. The Company has chosen to account for stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees", and related Interpretations.
Accordingly, compensation cost for stock options is measured as the excess, if
any, of the estimated fair value of the Company's stock at the date of the grant
over the amount an employee must pay to acquire the stock. The Company has
adopted the "disclosure only" alternative described in SFAS 123 and SFAS 148,
which require pro forma disclosures of net income and earnings per share as if
the fair value method of accounting had been applied.

The following table presents pro forma net income (loss) and per share amounts
as if the fair value method had been applied to employee stock options granted

                                                      2002           2001
                                                      ----           ----
Net income (loss) as reported..................     $688,000      $(150,000)

Pro forma compensation expense.................      (71,000)      (380,000)
                                                    --------      ---------
Pro forma net income (loss) ...................     $617,000      $(530,000)
                                                    ========      =========

Net income (loss) per share:
                                                      2002           2001
                                                      ----           ----
Basic, as reported.............................       $.14          $(.03)
Diluted, as reported...........................       $.13          $(.03)
Basic, pro forma...............................       $.13          $(.11)
Diluted, pro forma.............................       $.12          $(.11)

Cash and Cash Equivalents

Highly liquid investments with an original maturity of three months or less are
classified as cash equivalents. These investments consist of income producing
securities, which are readily convertible to cash and are stated at cost, which
approximates fair value.

Certificates of Deposit

In addition to cash equivalents, the Company invests in certificates of deposit
bearing interest of 3.02% and maturing within one year.

Supplemental Disclosures of Cash Flow Information

Cash payments for interest totaled approximately $34,000 and $102,00 in the
years ended December 31, 2002 and 2001, respectively.

                                                                 Year Ended
                                                                December 31,
                                                              ----------------
                                                              2002        2001
                                                              ----        ----
Non-cash investing and financing activities:
Business acquisition in exchange for common stock..........   $  -      $20,000

                                       29
<PAGE>

Property and Equipment

Property and equipment is depreciated using the straight-line method.
Depreciation on equipment and furniture is computed using the estimated useful
lives of the assets, which range from three to seven years. Leasehold
improvements are amortized over the shorter of the useful life of the asset or
the lease term. Accelerated methods are used for tax purposes.

Impairment of Long-Lived Assets

SFAS No. 144 provides a single accounting model for long-lived assets to be
disposed of. SFAS No. 144 also changes the criteria for classifying an asset as
held for sale, and broadens the scope of businesses to be disposed of that
qualify for reporting as discontinued operations and changes the timing of
recognizing losses on such operations. The Company adopted SFAS No. 144 on
January 1, 2002. The adoption of SFAS No. 144 did not affect the Company's
financial statements.

In accordance with SFAS No. 144, long-lived assets, such as property, plant,
equipment, and purchased intangibles subject to amortization, are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to estimated undiscounted future cash flows expected to be generated by the
asset. If the carrying amount of an asset exceeds its estimated undiscounted
future cash flows, an impairment charge is recognized by the amount by which the
carrying amount of the asset exceeds the fair value of the asset. Assets to be
disposed of would be separately presented in the balance sheet and reported at
the lower of the carrying amount or fair value less costs to sell, and are no
longer depreciated. The assets and liabilities of a disposed group classified as
held for sale would be presented separately in the appropriate asset and
liability sections of the balance sheet.

Prior to the adoption of SFAS No. 144, the Company accounted for long-lived
assets in accordance with SFAS No. 121, "Accounting for Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of."

Software Development Costs

Development costs relating to new software products and enhancements to existing
software products are expensed as incurred until technological feasibility has
been established, after which additional costs would be capitalized in
accordance with SFAS No. 86, "Accounting for the Costs of Computer Software to
be Sold, Leased or Otherwise Marketed." There were no software development costs
capitalized for the years ended December 31, 2002 and 2001 as the costs incurred
between technological feasibility and general availability were not significant.

Goodwill and Other Intangible Assets

On January 1, 2002, the Company adopted Financial Accounting Standards No. 141
("SFAS 141"), "Business Combinations", and No. 142 ("SFAS 142"), "Goodwill and
Other Intangible Assets". SFAS No. 141 addresses financial accounting and
reporting for business combinations. All business combinations in the scope of
SFAS 141 will be accounted for using the purchase method of accounting. The
provisions of SFAS No. 141 apply to all business combinations initiated after
June 30, 2001. SFAS No. 142 addresses financial accounting and reporting for
acquired goodwill and other intangible assets. Under SFAS 142, goodwill is no
longer required to be amortized but is required to be tested for impairment at
least annually at the reporting unit level. Additionally, goodwill should be
tested for impairment on an interim basis if an event occurs or circumstances
change that would more-likely-than-not reduce the fair value of a reporting unit
below its carrying value. The adoption of this standard did not have a material
effect on the Company's consolidated financial position or results of operations
since goodwill from previous acquisitions had been fully amortized in prior
years.

                                       30
<PAGE>

Research and Development

Research and development costs are expensed as incurred.

Income Taxes

The Company uses the asset and liability method of accounting for income taxes.
Under the asset and liability method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts and the tax basis of existing assets
and liabilities. A valuation allowance is recorded to reduce tax assets to an
amount in which realization is more likely than not.

The Company has recorded a full valuation allowance against its deferred tax
assets. In the event the Company determines that the deferred tax assets may be
realized in the future in excess of the net recorded amount, an adjustment to
the deferred tax valuation allowance would increase income in the period such
determination is made.

Earnings Per Share

Basic earnings per share is based on the weighted average number of common
shares outstanding. Diluted earnings per share is based on the weighted average
number of common shares outstanding and all dilutive potential common shares
outstanding. Dilutive equivalent shares consist of stock options and warrants
using the treasury stock method.

Due to the loss in 2001, the effect of options and warrants as disclosed in Note
7 has not been considered in dilutive earnings per share for 2001, as inclusion
of such options and warrants would have had an antidilutive impact.

The following table reconciles the basic and fully diluted shares used to
compute earnings per share data:

                                                                   Year Ended
                                                                  December 31,
                                                                 --------------
                                                                  2002     2001
                                                                 -----    -----
Denominator for basic earnings per share,
 weighted average shares                                         4,835    4,749
Employee stock options                                             130        -
                                                                 -----    -----
Denominator for diluted earnings per share,
 weighted average shares                                         4,965    4,749
                                                                 =====    =====


Significant Customers

The Company's largest customer is the federal government. Therefore the Company
has a concentration of credit risk associated with its accounts receivable. The
Company does not believe the likelihood of a loss arising from such
concentration is significant. The Company performs ongoing credit evaluations on
its commercial customers.

Sales to U.S. government agencies totaled approximately $6,648,000 and
$11,426,000 in 2002 and 2001, respectively. As of December 31, 2002 and 2001,
accounts receivable due from U.S. government agencies were approximately
$679,000 and $1,585,000, respectively.

Fair Value of Financial Instruments

Financial instruments include cash and cash equivalents, short-term investments,
accounts receivable, and accounts payable. The carrying amounts of financial
instruments approximate fair value due to the short maturity of these
instruments.

                                       31
<PAGE>

Segment Reporting

The Company adopted Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS
131"), during 1998. SFAS 131 replaces the "industry segment" approach with the
"management" approach to reporting financial information about an enterprise's
segments. The management approach designates the internal organization that is
used by management for allocating resources and assessing performance as the
source of the Company's reportable segments. The Company is managed along three
business segments, the Commercial, Government, and Intelligence business units.

Comprehensive Income

The Company does not have any components of comprehensive income other than Net
income (loss).

Reclassifications

Certain amounts for 2001 have been reclassified to conform to the current
period's presentation.

New Accounting Pronouncements

In April 2002, the Financial Accounting Standards Board (FASB) issued FAS 145,
"Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement
No. 13, and Technical Corrections." FAS 145 rescinds FAS 4 and FAS 64, which
addressed the accounting for gains and losses from extinguishment of debt,
rescinds FAS 44 which set forth industry-specific transitional guidance, amends
FAS 13 to require that certain lease modifications that have economic effects
similar to sale-leaseback transactions be accounted for in the same manner as
sale-leaseback transactions and makes technical corrections to certain existing
pronouncements that are not substantive in nature. The provisions of this
statement are effective for fiscal year 2003.The Company does not believe there
will be a material effect from the adoption of this standard.

In July 2002, the FASB issued FAS 146, "Accounting for Exit or Disposal
Activities." FAS 146 addresses the recognition, measurement and reporting of
costs associated with exit and disposal activities, including restructuring
activities that are currently accounted for pursuant to the guidance set forth
in Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability Recognition
for Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)." The scope of FAS 146
includes costs related to terminating a contract that is not a capital lease,
costs to consolidate facilities or relocate employees, and certain termination
benefits provided to employees who are involuntarily terminated. SFAS 146 is
effective for exit or disposal activities initiated after December 31, 2002. The
Company does not believe there will be a material effect from the adoption of
this standard.

In November 2002, the FASB issued FASB Interpretation No. 45 (FIN 45),
Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others. FIN 45 addresses the disclosure
requirements of a guarantor in its interim and annual financial statements about
its obligations under certain guarantees that it has issued. FIN 45 also
requires a guarantor to recognize, at the inception of a guarantee, a liability
for the fair value of the obligation undertaken in issuing the guarantee. The
disclosure requirements of FIN 45 are effective for the Company effective
December 31, 2002. The liability recognition requirements will be applicable
prospectively to all guarantees issued or modified after December 31, 2002. This
pronouncement is not expected to have a material impact on the Company's
financial position or results of operations.

In December 2002 the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation-Transition and Disclosure. SFAS No. 148 amends the disclosure and
certain transition provisions of SFAS No. 123, Accounting for Stock-Based
Compensation. Its disclosure provisions, which apply to all entities with
employee stock-based compensation, are effective for fiscal years ending after
December 15, 2002. New interim period disclosures are required in financial
statements for


                                       32
<PAGE>

interim periods beginning after December 15, 2002. Other than the additional
disclosure requirements, this pronouncement is not expected to have a material
impact on the Company's financial position or results of operations.

On January 31, 2003, the FASB issued FASB Interpretation No. 46, Consolidation
of Variable Interest Entities ("FIN 46"). FIN 46 clarifies existing accounting
for whether interest entities should be consolidated in financial statements
based upon the investee's ability to finance activities without additional
financial support and whether investors possess characteristics of a controlling
financial interest. FIN 46 applies to years or interim periods beginning after
January 31, 2003. This pronouncement is not expected to have a material impact
on the Company's financial position or results of operations.

NOTE 2. Operations

The Company has had a history of operating and cash flow losses. Management has
taken a number of actions in 2002, including reductions in force and other
cost-cutting measures, to restore the Company to positive operations and cash
flows. As a result of these efforts, the Company had three consecutive
profitable quarters during 2002. Additionally, management was able to obtain
receivable financing for working capital requirements. Management believes that
existing cash, short-term investments, and the credit facility will be
sufficient to fund working capital requirements for 2003.

NOTE 3. Accounts Receivable

Accounts receivable consist of the following:
                                                              December 31,
                                                       ------------------------
                                                          2002          2001
                                                       ----------    ----------
U.S. government:
    Amounts billed.................................    $  678,000    $1,585,000
    Recoverable costs and accrued profit
    on progress completed but not billed...........       176,000       456,000
                                                       ----------    ----------
                                                          854,000     2,041,000
                                                       ----------    ----------
Commercial customers:
    Amounts billed.................................       304,000       792,000
    Recoverable costs and accrued profit
    on progress completed but not billed...........       686,000       196,000
                                                       ----------    ----------
                                                          990,000       988,000
                                                       ----------    ----------
Less allowance for doubtful accounts...............       (38,000)      (35,000)
                                                       ----------    ----------
        Total......................................    $1,806,000    $2,994,000
                                                       ==========    ==========


NOTE 4.  Property and Equipment

Property and equipment consisted of:

                                          Estimated            December 31,
                                         Useful Life      ---------------------
                                          in Years          2002         2001
                                         -----------      --------     --------

Furniture and fixtures                         7          $ 24,000     $ 24,000
     Computer equipment/software               3           439,000      414,000
     Leasehold improvements                  3 - 5          80,000       80,000
                                                          --------     --------
               Total                                       543,000      518,000
     Less:  Accumulated depreciation                      (464,000)    (333,000)
                                                          --------     --------
                                                          $ 79,000     $185,000
                                                          ========     ========

                                       33
<PAGE>

Depreciation and amortization expense for the years ended December 31, 2002 and
2001, were approximately $131,000 and $147,000, respectively. During 2001, the
Company identified property and equipment with a gross cost of approximately
$2,813,000 that was fully depreciated and not in use. Accordingly, the Company
has removed such amounts from its accounts.

NOTE 5.  Income Taxes

At December 31, 2002, the Company had approximately $13,096,000 in net operating
loss carryforwards for income tax reporting purposes. Net operating loss
carryforwards of approximately $1,090,000 expired unused in 2001. In addition,
at December 31, 2002, the Company had approximately $157,000 in general business
tax credit carryforwards that begin to expire in 2017.

The actual income tax expense attributable to pretax income for the years ended
December 31, 2002, and December 31, 2001, respectively, differed from the
amounts computed by applying the Federal statutory rate of 34% as a result of
the following:
                                                            2002         2001
                                                          --------     ---------
Tax at statutory rate...........................          $261,000     $(51,000)
Change in valuation allowance...................          (294,000)    (685,000)
Nondeductible amortization......................                 -            -
Other...........................................            33,000      736,000
                                                          --------     --------
                                                          $      -     $      -
                                                          ========     ========

 The significant components of net deferred tax assets are as follows as of
December 31, 2002 and 2001:

                                                          2002          2001
                                                       ----------    ----------
Deferred tax assets:
   Net operating loss carryforward..................   $5,364,000    $5,145,000
   General business tax credit and research and
    development tax credits carryforward............      157,000       188,000
   Other............................................            -       482,000
                                                       ----------    ----------
Valuation allowance ................................   (5,521,000)   (5,815,000)
                                                       ----------    ----------
Net deferred tax asset .............................   $        -    $        -
                                                       ==========    ==========

Under the provisions of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," the tax effect of the net operating loss and
general business tax credit carryforwards, together with net temporary
differences, represents a net deferred tax asset. A full valuation allowance has
been recorded against the reserve because management could not conclude more
likely than not that the benefit of such asset would be realized in future
periods.

NOTE 6. Short-term Debt

On June 3, 2002, the Company entered into a one-year Assignment and Transfer of
Receivables Agreement (the "Agreement") to assign its eligible receivables to
Commerce Funding Corporation ("CFC") up to $1,000,000. Pursuant to the terms of
the Agreement, CFC has sole discretion in determining the receivables that are
eligible for assignment, and the Agreement is collateralized by a security
interest in all receivables owned or thereafter acquired, including all contract
rights, proceeds and returned goods thereof, and all accounts and cash
maintained by the Company with any bank or financial institution. The Agreement
may be terminated by either party at their discretion and at any time by giving
a thirty -day written notice to the other party. CFC may terminate the Agreement
at any time if the Company commits any event


                                       34
<PAGE>

of default. Interest under the Agreement is to be paid semi-monthly at Prime
+1.75 percentage points, in addition to processing fees of .65% of gross invoice
amounts for the first thirty days a receivable is assigned. The Company is
required to pay a minimum charge of approximately $2,000 per month for interest
and processing fees, which is deductible from the actual interest and processing
fees due for the month. As of December 31, 2002, the Company had outstanding
borrowings under the Agreement of approximately $55,000.

The Company previously had a working capital line of credit with Merrill Lynch
Business Financial Services Inc. ("Merrill Lynch") collateralized by accounts
receivable, equipment, and other intangibles, that expired on April 30, 2001,
thus accelerating all amounts due under this line of credit. As of December 31,
2001, the Company had outstanding borrowings of approximately $616,000. As of
May 30, 2002, the Company had fully repaid all amounts outstanding under the
line of credit with Merrill Lynch.

NOTE 7.  Stock Options and Warrants

In April 1995, the Company's shareholders approved the adoption of the 1995
Stock Option Plan (the "1995 Plan"), which (i) consolidated the Company's 1991
Incentive Stock Option Plan and 1992 Non-Qualified Stock Option Plan and (ii)
provided for the automatic grant of stock options to the members of the
Compensation Committee of the Company's Board of Directors. A total of 2,261,000
shares of Common Stock have been authorized and reserved for issuance under the
1995 Plan at exercise prices which will not be less than 100% of the fair market
value of the underlying shares on the date of grant of the option. Options vest
over varying years of service. Vested options are exercisable until the earlier
of ten years from the date of grant or three months after termination of
employment for options granted under either the 1991 Incentive Stock Option Plan
or the 1992 Non-Qualified Stock Option Plan. Options originally granted under
the 1995 Plan are exercisable until the earlier of ten years from the date of
grant or one month after termination of employment.

As a result of the acquisition of AMBIA Corporation ("AMBIA"), in July 1997,
each outstanding option ("AMBIA Stock Option") to purchase shares of AMBIA
Common Stock under the former AMBIA Equity Incentive Plan (as defined in the
Merger Agreement) was converted into an option ("Replacement Option") to
acquire, on the same terms and conditions as were applicable under such AMBIA
Stock Option, 4/45 of a share of Common Stock of the Company, at an exercise
price of $1.69 per share with the same expiration date as each such AMBIA Stock
Option. Replacement Options to purchase a total of 34,665 shares of the
Company's Common Stock were granted to replace the previously granted AMBIA
Stock Options. As of December 31, 2001, all Replacement Options had been
exercised, canceled or terminated.

As of December 31, 2002, the Company had reserved a total of approximately
754,000 shares of Common Stock for future issuance upon the exercise of future
grants of stock options under the 1995 Plan.

A summary of option activity under the 1995 Plan and the former AMBIA Equity
Incentive Plan is presented below:

<TABLE>
<CAPTION>
                                                                            Weighted Average
                                              Number of     Option Price      Option Price
                                                Shares       Per Share         Per Share
                                              ---------    --------------   ----------------

<S>                                           <C>          <C>                    <C>
Outstanding at December 31, 2000............  1,500,429    $0.563-$11.000         $3.081
   Granted..................................    303,998     $0.630-$1.655         $0.949
                                                   -              -                 -
Exercised................................
   Expired/Canceled.........................   (426,713)    $0.630-$7.380         $3.069
                                              ---------    --------------         ------
Outstanding at December 31, 2001............  1,377,714    $0.563-$11.000         $2.614
                                              ---------    --------------         ------
   Granted..................................    791,796     $0.120-$0.385         $0.134
                                                (84,115)       $0.120             $0.120
Exercised................................
   Expired/Canceled.........................   (578,608)    $0.120-$11.00         $3.051
                                              ---------    --------------         ------
Outstanding at December 31, 2002............  1,506,787     $0.120-$5.438         $1.283
                                              ---------    --------------         ------
Exercisable at December 31, 2002                960,433     $0.120-$5.438         $1.723
                                              ---------    --------------         ------
</TABLE>

                                       35
<PAGE>



       Outstanding and Exercisable by Price Range as of December 31, 2002

                                  Options Outstanding      Options Exercisable
                                 ----------------------   ----------------------
                                  Weighted
                      Number       Average     Weighted     Number      Weighted
                   Outstanding    Remaining    Average    Exercisable   Average
    Range of          as of      Contractual   Exercise      as of      Exercise
Exercise Prices      12/31/02       Life        Price      12/31/02      Price
----------------   -----------   -----------   --------   -----------   --------
$0.1200  $0.1200      422,681       9.58        $0.120      113,181      $0.120
$0.1400  $0.5625      229,500       9.82        $0.172       94,250      $0.170
$0.6300  $0.8400      115,373        8.1        $0.720       85,283      $0.739
$1.0630  $1.0630      214,372       4.39        $1.063      193,074      $1.063
$1.6875  $2.1250      228,700       4.84        $1.841      207,444      $1.834
$2.2000  $4.7500      231,537       5.18        $3.148      222,337      $3.151
$5.1250  $5.3755       30,500       7.13        $5.228       20,970      $5.228
$5.4375  $5.4375       34,124       7.05        $5.438       23,894      $5.438
                    ---------       ----        ------      -------      ------
                    1,506,787       7.37        $1.283      960,433      $1.723

The Company complies with the disclosure requirements of SFAS 123, "Accounting
for Stock-Based Compensation". The Company applies APB Opinion 25 and related
interpretations in accounting for its plans. Accordingly, compensation cost has
been recognized for its stock plans based on the intrinsic value of the stock
option at date of grant (i.e., the difference between the exercise price and the
fair value of the Company's Common Stock). Had compensation cost for the
Company's stock-based compensation plans been determined based on the fair value
at the grant dates for awards under those plans consistent with the method of
SFAS 123, the Company's net income and earnings per share would have been
reduced to the pro forma amounts indicated below.

                                                            2002        2001
                                                         ---------   ----------
     Net income (loss) as reported..................     $688,000    $(150,000)

     Pro forma compensation expense.................      (71,000)    (380,000)
                                                         --------    ---------
     Pro forma net income (loss) ...................     $617,000    $(530,000)


Net income (loss) per share:
                                                            2002        2001
                                                         ---------   ----------
     Basic, as reported.............................        $.14       $(.03)
     Diluted, as reported...........................        $.13       $(.03)
     Basic, pro forma ..............................        $.13       $(.11)
     Diluted, pro forma.............................        $.12       $(.11)

The weighted average fair value of options granted in 2002 and 2001 was $0.11
and $0.60, respectively. The fair value of each option is estimated on the date
of grant using the Black-Scholes option-pricing model with the following
assumptions used for grants in 2002 and 2001: no dividend yield and expected
life of five years, and expected volatility of 199% and 126% for 2002 and 2001,
respectively. The risk-free interest rate for the years ended December 31, 2002
and 2001 was 3.82% and 4.78%, respectively.

From time to time, the Company may be required to grant stock options as partial
or complete remuneration for services it receives. The value of such options is
measured at the fair value of the options granted or service rendered, whichever
is more readily available. The Company grants such options outside the scope of
its formalized 1995 Plan. As of December 31,


                                       36
<PAGE>

2002 and 2001, fully vested options to purchase a total of 660,000 shares and
260,000 shares, respectively, at fair market value as of the date of grant had
been granted outside the scope of the 1995 Plan and were outstanding.

In October 2000, the Company issued a fully vested non-forfeitable warrant to an
investment banking firm with an estimated fair value of $55,000 to purchase
100,000 shares of Common Stock through October 2005 at an exercise price of
$1.68 per share in exchange for certain investment banking services. As of
December 31, 2002, these warrants had not been exercised.

NOTE 8.  Commitments and Contingencies

Operating Leases

The Company has entered into a lease for its corporate headquarters facility in
Fairfax, Virginia that expires on July 31, 2003.

In March 2001, the Company sublet 2,018 square feet of office space in its
Fairfax, Virginia headquarters to a third party for the period of April 1, 2001
to July 31, 2003. Sublease payments cover the Company's costs for that space up
to July 31, 2003.

Future minimum lease payments under non-cancelable leases as of December 31,
2002 are approximately $242,000.

Rent expense charged to operations for the years ended December 31, 2002 and
2001 amounted to approximately $433,000 and $722,000, respectively.

Employment Agreement

In November 2002, the Company entered into an employment agreement with its
President and Chief Executive Officer. In addition to receiving a base salary
and other incentives, the President was issued 100,000 shares of common stock
valued at approximately $17,000, as well as options to purchase an additional
150,000 shares of the Company's common stock, vesting over a three year period.
The exercise price of such options was equal to the fair market value of the
Company's common stock at the date of grant.

Contingencies

Costs charged to cost-type U.S. Government contracts are subject to annual audit
by the Defense Contract Audit Agency or other duly authorized representatives of
the U.S. Government. No audits have been completed for any periods commencing
after 1998. In January 2003, the audit commenced for the years 1999 - 2001 and
is still ongoing. In the opinion of management, adjustments resulting from the
completion of such audits and future audits are not expected to have a material
impact on the Company's financial position or results of future operations.

The Company has been notified by the Department of Labor that its employee
benefit plan (the "Benefit Plan") which qualifies under Section 401(k), for plan
year ended December 31, 2000, was required to have an independent Accountant's
Opinion rendered on the Benefit Plan's financial statements to be issued no
later than October 15, 2001. The Audit Committee is evaluating bids received
from two independent accounting firms. Failure to file these forms on time could
result in government penalties up to $1,100 per day. The likelihood or amount of
penalties, if any, that might be imposed has not been determined, and
accordingly, an amount has not been accrued for in the accompanying consolidated
financial statements.

On April 19, 2002, the Company received a notice from Science Applications
International Corporation ("SAIC") terminating its proposed acquisition of the
Company pursuant to the Agreement of Merger. A per the Agreement of Merger, the
Company may be required to pay a termination fee of $50,000 to SAIC under
certain specific conditions.


                                       37
<PAGE>

Management has been advised orally by SAIC that it does not intend to pursue the
termination fee and accordingly, this amount has not been accrued for in the
accompanying consolidated financial statements.

From time to time, the Company is subject to claims arising in the ordinary
course of business. In the opinion of management, no such matter, individually
or in the aggregate, exists which is expected to have a material effect on the
results of operations, cash flows or financial position of the Company.

NOTE 9. Employee Benefit Plans

In 1988, the Company established an employee benefit plan (the "Benefit Plan")
which qualifies under Section 401(k) of the Internal Revenue Code. The Benefit
Plan allows salaried employees to contribute a part of their compensation toward
their retirement on a tax-deferred basis. Required Company contributions equate
to 50% of the first 6% of the employee's semi-monthly deferral to the Benefit
Plan and totaled approximately $71,000 in 2002 and $178,000 in 2001. In addition
to the required contributions, the Company may, at the sole discretion of its
Board of Directors, make profit-sharing contributions to the Benefit Plan. No
profit sharing contributions were made in 2002 or 2001.

As adopted by the Company and approved by its shareholders in May 1997, the
Company established an employee stock purchase plan for all eligible employees
to purchase shares of its Common Stock at 85% of the lower of the fair market
value on the first or the last day of each three-month offering period.
Employees may authorize the Company to withhold up to 15% of their compensation
during any offering period, subject to certain limitations. The 1997 Employee
Stock Purchase Plan authorizes up to 400,000 shares to be issued. During 2001,
shares totaling 54,465 were purchased under the plan at a weighted average price
of $0.67 per share. At December 31, 2002, 212,756 shares were reserved for
future issuance.

The Company has been notified by the Department of Labor that its Benefit Plan
for plan year ended December 31, 2000, was required to have an independent
Accountant's Opinion rendered on the Benefit Plan financial statements issued no
later than October 15, 2001. The Audit Committee is evaluating bids received
from two independent accounting firms. Failure to file these forms on time could
result in government penalties up to $1,100 per day. The likelihood or amount of
penalties, if any, that might be imposed has not been determined, and
accordingly, an amount has not been accrued for in the accompanying consolidated
financial statements.

NOTE 10. Related-Party Transactions

The Company incurred management consulting fees of approximately $99,000 and
$104,000 in 2002 and 2001, respectively, for services rendered by certain
directors of the Company. In addition, amounts payable for these services to
companies employing these directors were approximately $10,000 and $7,000 at
December 31, 2002 and 2001, respectively.

In March 2000, the Company was engaged by Claria Corporation (CLARIA) to provide
web-based design and development services. Through September 30, 2000, the
Company recognized approximately $400,000 in revenue and related receivables
under its contract with CLARIA. CLARIA, an on-line recruiting firm, informed the
Company in September that it would be unable to continue to make timely payments
pursuant to the terms of its contract with the Company. Mr. Alan S. Fisher, the
vice-chairman of the Company, is the chairman of the board of directors of
CLARIA. On November 13, 2000, CLARIA executed a twenty-four month promissory
note in the principal amount of $314,396. As of December 31, 2000, the principal
amount was $302,465, the note yielded 9.63% annual interest, was payable in
monthly installments of $14,454, and was personally guaranteed by Mr. Alan S.
Fisher and Mr. Razi Mohiuddin, a director of CLARIA and a former officer of
Infodata Systems Inc. In April 2001, the guarantors of the note offered to
prepay the outstanding principal amount, less a discount of approximately 4%.
The Company agreed to the discount and on June 22, 2001, the note was paid off
in the amount of approximately $289,000.

                                       38
<PAGE>

In December 1999, the Company was engaged by Redknife, Inc. (REDKNIFE) to
develop and implement a comprehensive systems infostructure for processing and
exchanging business transactions over the web. Through December 31, 2000, the
Company recognized approximately $1,277,000 in revenue and related receivables
under its contract with REDKNIFE. During the quarter ended December 31, 2000, a
dispute arose between the Company and REDKNIFE regarding future obligations,
work completed and the amounts currently due the Company of approximately
$413,000 and owing under both the Master Consulting Agreement and the Letter
Agreement. Mr. Alan S. Fisher, the vice-chairman of the Company, is a general
partner and founder of Wingspring, a shareholder of REDKNIFE. On February 8,
2001, a contract modification was consummated resulting in a reduction of
contract value by $188,000. During 2001, the balance due to the Company of
approximately $225,000 was paid in full by REDKNIFE.

NOTE 11.  Segment Reporting

In 1998, Infodata adopted SFAS 131, "Disclosures about Segments of an Enterprise
and Related Information."

The Company has changed its reportable business segments as a result of the
change in management, which occurred in the fourth quarter of 2002. Prior period
results have been restated to conform to current period's presentation. The
Company's new management team is focused on selling solutions to Commercial,
Government, and Intelligence Community customers, with sales and marketing
efforts focused on providing solutions in and around content review, content
assembly and publishing, content security, content transformation, and content
analytics within these business units. As such, internal financial reporting
that is provided to the chief operating decision-maker is evaluated along these
lines of business. The solution offerings are services, proprietary products,
and third party products. Services revenues are derived from specific vertical
market solutions by delivering a software services layer that enhances the
capabilities of content management systems. License revenues are derived from
the licensing of proprietary software products and their associated maintenance
and support. Third party revenues include software licenses and hardware with
some related services.

The accounting policies of the segments are the same as those described in the
"Summary of Significant Accounting Policies."

Infodata's management team budgets and evaluates its segment performance on the
basis of revenues less direct costs, which includes all direct labor and fringe
benefits, other direct costs, and all overhead labor plus related fringe
benefits and non-labor overhead costs, that either is caused by or benefits each
segment. In prior years, direct costs used to determine segment profit included
direct labor and fringe benefits, other direct costs, and overhead labor and
related fringe benefits. The Company does not internally report assets on a
segment basis. For comparison purposes, the Company has prepared separate
information for the years ended December 31, 2002 and 2001 to conform to the
Commercial, Government, and Intelligence Community segments.

The table below presents information about reported segments for the years ended
December 31, 2002 and 2001, as well as a reconciliation to reported income
(loss) before income taxes (in thousands).

                                       39
<PAGE>

<TABLE>
<CAPTION>
                                                      2002                                              2001
                                -----------------------------------------------   ------------------------------------------------
                                Commercial   Government   Intelligence   Total    Commercial   Government   Intelligence   Total
                                -----------------------------------------------   ------------------------------------------------
<S>                               <C>          <C>           <C>         <C>        <C>          <C>           <C>        <C>
Revenues
   Services ..................    $1,300       $1,317        $4,645      $7,262     $1,965       $1,538        $8,154     $11,657
   License Fees ..............     1,854          158                     2,012      1,971          108            33       2,112
   Third party products            1,268          441            87         528        158        1,393           205       1,756
                                  ------       ------        ------      ------     ------       ------        ------     -------
      Total revenues..........    $3,154       $1,916        $4,732      $9,802     $4,095       $3,039        $8,391     $15,525

Direct costs..................     1,268        1,442         3,383       6,093      2,453        2,738         6,993      12,184
                                  ------       ------        ------      ------     ------       ------        ------     -------
Segment profit................     1,886          474         1,349       3,709      1,642          301         1,399       3,341

Research and development......                                             (731)                                             (487)
Other costs not allocated
 to segments, primarily
 selling, general and
 administrative...............                                           (2,267)                                           (4,036)
Gain on sale of investment                                                   --                                             1,068
Interest net..................                                              (23)                                              (36)
                                                                         ------                                           -------
Income (loss) before
 income taxes.................                                           $  688                                           $  (150)
                                                                         ======                                           =======
</TABLE>


NOTE 12. Business Acquisition

On March 30, 2000, the Company acquired a business unit from Earth Satellite
Corporation specializing in providing software development services to the U.S.
intelligence community. The Company issued 40,000 shares of its Common Stock
with a fair market value of $3.563 per share, which was equal to the average of
the closing bid and ask prices of the Company's Common Stock on that date. On
February 9, 2001, the Company issued an additional 13,334 shares of its Common
Stock with a fair market value of $1.50 per share, to Earth Satellite
Corporation pursuant to a working capital adjustment provision included in the
acquisition agreement between the Company and Earth Satellite Corporation in
this transaction, which resulted in a purchase price adjustment of approximately
$20,000 that was attributed to goodwill. The acquisition cost of this business
unit as of December 31, 2001 was approximately $199,000, including approximately
$37,000 of direct cost attributed to the business unit's sole contract. The
acquisition value of that contract was amortized over its life of 18 months.

NOTE 13. Subsequent Events

On February 9, 2003, Harry Kaplowitz resigned his position as Executive Vice
President of the Company to accept an executive position at another company. In
connection with his resignation and in view of Mr. Kaplowitz' 35 years of valued
service with the Company, the Board of Directors approved the immediate vesting
of previously granted options for 10,000 shares of common stock.


                                       40
<PAGE>


EXHIBIT INDEX

Exhibit Number                          Description
--------------                          -----------

    2.1           Plan and Agreement of Merger, dated as of March 10, 1995, by
                  and between Infodata Systems Inc. and Virginia Infodata
                  Systems Inc. (incorporated herein by reference to Exhibit 2.1
                  to the Company's Registration Statement on Form SB-2
                  (Registration No. 333-42611) dated December 18, 1997, as
                  amended).

    2.2           Asset Purchase Agreement and Plan of Reorganization, dated as
                  of October 6, 1995, among the Company, Merex, Inc. and Richard
                  M. Tworek, Mary Margaret Styer and Andrew M. Fregly
                  (incorporated by reference to the Company's Current Report on
                  Form 8-K dated October 11, 1995).

    2.3           Agreement of Merger and Plan of Reorganization, dated as of
                  July 22, 1997, by and among the Company, AMBIA Corporation,
                  Alan Fisher and Razi Mohiuddin, Software Partners, Inc. and
                  AMBIA Acquisition Corporation (incorporated by reference to
                  the Company's Current Report on Form 8-K dated August 6, 1997
                  and Form 8-K/A dated October 6, 1997).

    3.1           Articles of Incorporation (incorporated by reference to
                  Exhibit A of the Company's Proxy Statement dated April 10,
                  1995).

    3.2           Articles of Amendment of Articles of Incorporation of the
                  Company, dated as of August 12, 1996 (incorporated herein by
                  reference to Exhibit 3.2 of the Company's Registration
                  Statement on Form SB-2 (Registration No. 333-42611) dated
                  December 18, 1997, as amended).

    3.3           By-Laws (incorporated by reference to Exhibit B to the
                  Company's Proxy Statement dated April 10, 1995).

    4.1           Form of Underwriters' Purchase Option (incorporated by
                  reference to Exhibit 4.1 to the Company's Registration
                  Statement on Form SB-2 (Registration No. 333-42611) dated
                  December 18, 1997, as amended).

   10.1           Cross License Agreement, dated as of December 3, 1997, as
                  amended, by and between the Company and Adobe Systems
                  Incorporated (incorporated herein by reference to Exhibit 10.1
                  to the Company's Registration Statement on Form SB-2
                  (Registration No. 333-42611) dated December 18, 1997, as
                  amended).

   10.2           Office Building Lease, dated as of April 12, 1993, by and
                  between the Company and Monument Fairfax Associates for One
                  Monument Drive (incorporated by reference to Exhibit 10(dd) to
                  the Company's Annual Report on Form 10-KSB for the fiscal year
                  ended December 31, 1994).

   10.3           Lease Agreement, dated as of July 20, 1993, between The
                  Landmark and Software Partners, Inc. for 2013 Landings Drive,
                  Mountain View, California (incorporated herein by reference to
                  Exhibit 10.3 to the Company's Registration Statement on Form
                  SB-2 (Registration No. 333-42611) dated December 18, 1997, as
                  amended).

   10.4           Lease for Data Processing Service Agreement, dated as of July
                  29, 1994, between the Company and Financial Technologies Inc.
                  (incorporated by reference to Exhibit 10(ee) to the Company's
                  Annual Report on Form 10-KSB for the fiscal year ended
                  December 31, 1994).

   10.5           Executive Separation Agreement, dated as of October 20, 1986,
                  between the Company and Harry Kaplowitz (incorporated by
                  reference to Exhibit 10(a) to the Company's Annual Report on
                  Form 10-KSB for the fiscal year ended December 31, 1993).

                                       41
<PAGE>

   10.6           Executive Separation Agreement, dated as of October 20, 1986,
                  between the Company and Robert Loane (incorporated by
                  reference to Exhibit 10(b) to the Company's Annual Report on
                  Form 10-KSB for the fiscal year ended December 31, 1993).

   10.7           Note, Loan and Security Agreement, dated as of October 31,
                  1997, between the Company and Merrill Lynch Business Financial
                  Services Inc. (incorporated herein by reference to Exhibit
                  10.10 to the Company's Registration Statement on Form SB-2
                  (Registration No. 333-42611) dated December 18, 1997, as
                  amended).

   10.8           1995 Stock Option Plan (incorporated by reference to Exhibit
                  4(a) to the Company's Registration Statement on Form S-8,
                  dated as of June 13, 1995).

   10.9           1997 Employee Stock Purchase Plan (incorporated herein by
                  reference to Exhibit 4(a) to the Company's Registration
                  Statement on Form S-8 dated as of June 27, 1997).

   10.10          Consulting Agreement, dated as of October 24, 1997, between
                  the Company and Adobe Systems Incorporated (incorporated
                  herein by reference to Exhibit 10.11 to the Company's
                  Registration Statement on Form SB-2 (Registration No.
                  333-42611) dated December 18, 1997, as amended).

   10.11          Letter Employment Agreement, dated as of October 29, 1998,
                  between the Company and Steven M. Samowich (incorporated
                  herein by reference to Exhibit 10.17 to the Company's Annual
                  Report on Form 10-KSB for the year ended December 31, 1998).

   10.12          Agreement on Confidential Information, Inventions, Ideas,
                  dated as of November 4, 1998, between the Company and Steven
                  M. Samowich (incorporated herein by reference to Exhibit 10.18
                  to the Company's Annual Report on Form 10-KSB for the year
                  ended December 31, 1998).

   10.13          Agreement and Plan of Merger, dated as of January 10, 2002, by
                  and among the Company, Science Applications International
                  Corporation and Info Acquisition Corp. (incorporated herein by
                  reference to Exhibit 2.1 to the Company's Form 8-K, dated
                  January 10, 2002).

   10.14          Letter Employment Agreement, dated as of November 15, 2002,
                  between the Company and Edwin A. Miller.

   10.15          Assignment and Transfer of Receivables Agreement, dated as of
                  July 2, 2002, between the Company and Commerce Funding
                  Corporation.

   21             Subsidiaries of the Company (incorporated herein by reference
                  to Exhibit 21.1 to the Company's Registration Statement on
                  Form SB-2 (Registration No. 333-42611) dated December 18,
                  1997, as amended).

   23.1           Consent of PricewaterhouseCoopers LLP.

   23.2           Consent of Grant Thornton LLP.

   99.1           Certification of Chief Executive Officer Pursuant to 18 U.S.C.
                  Section 1350.

   99.2           Certification of Chief Financial Officer and Corporate
                  Secretary Pursuant to 18 U.S.C. Section 1350.

                                       42

<PAGE>

                                   SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

Dated:  March 31, 2003
                                       INFODATA SYSTEMS INC.


                                       By: /s/ Edwin A. Miller
                                          --------------------------------------
                                           President and Chief Executive Officer


In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and on the dates indicated.

SIGNATURE                                    TITLE                     DATE
---------                                    -----                     ----


/s/ Richard T. Bueschel           Chairman of the Board           March 31, 2003
------------------------------
Richard T. Bueschel


/s/ Alan S. Fisher                Director                        March 31, 2003
------------------------------
Alan S. Fisher


/s/ Christine Hughes              Director                        March 31, 2003
------------------------------
Christine Hughes


/s/ Robert M. Leopold             Director                        March 31, 2003
------------------------------
Robert M. Leopold


/s/ Edwin A. Miller               President, Chief Executive      March 31, 2003
------------------------------    Officer, and Director
Edwin A. Miller                   (Principal Executive Officer)


/s/ Isaac M. Pollack              Director                        March 31, 2003
------------------------------
Isaac M. Pollack


/s/ Millard H. Pryor, Jr.         Director                        March 31, 2003
------------------------------
Millard H. Pryor, Jr.


/s/ Laura L. Sullivan             Controller (Principal           March 31, 2003
------------------------------    Accounting Officer)
Laura L. Sullivan


/s/ Norman F. Welsch              Chief Financial Officer         March 31, 2003
------------------------------    and Corporate Secretary
Norman F. Welsch                  (Principal Financial Officer)


                                       43
<PAGE>

                                 CERTIFICATIONS

I, Edwin A. Miller, certify that:

1. I have reviewed this annual report on Form 10-KSB of Infodata Systems Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.


Date: March 31, 2003


/s/ Edwin A. Miller
-------------------------------------
Edwin A. Miller
President and Chief Executive Officer


                                       44
<PAGE>

                                 CERTIFICATIONS

I, Norman F. Welsch, certify that:

1. I have reviewed this annual report on Form 10-KSB of Infodata Systems Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.


Date: March 31, 2003


/s/ Norman F. Welsch
-----------------------------------------------
Norman F. Welsch
Chief Financial Officer and Corporate Secretary


                                       45